Inflation is caused by excessive currency printing by our Federal Government; and, inflation causes our currency to devalue; which, in return, causes the price for goods and services to rise in cost.
To continue with their current level of spending, our Federal Government basically has two options:
1. Borrow more money from other countries – which increases our national debt; causes the interest on our current debt to compound further; and which needs to be paid back at some point in the future.
2. Raise taxes on the citizens.
Since raising taxes is not very popular, politically, and continuing to borrow money is not very prudent, our Federal Government, instead, creates money out of thin air, to support their desire to spend more money. Therefore, anyone who insists that our Federal Government spend more money, without cutting spending in other areas, should keep in mind, that, all people, of all income levels, at some point, are going to be affected by inflation. And, likely, not too far in the distant future. For anyone who remembers the late 70s, not much else really needs to be said.
While the current income tax rates were recently extended by Congress; and, while it is better, economically, for people and businesses to keep more of their own money – as long as The Federal Government continues to create and spend more money it doesn’t have, eventually, down the road, this will still be tantamount (in the form of inflation) to a consumption-based, or national sales tax. For these reasons, and several others, it is said that inflation is the most insidious tax of all.
Since 1913, currency in our country, is created, and regulated, by “unelected” central bankers at our Federal Reserve Bank, to which, unbelievably, not even Congress can audit! At least a regular tax increase is done by “elected officials” who have been given the Constitutional authority to raise and levy taxes; and taxation utilizes currency that has already been created, and is in circulation.
If we had sound money, based on gold or silver, as it once was in The United States, then no one in our Federal Government could devalue our currency! As they could only print, and spend money based on the amount of gold or silver that we, as a country owned.
In my humble opinion, unless the Federal printing, and spending is stopped, income tax rates, marginally, mean very little. As inflation creeps in, no one, from any income level will be immune. And, this is why I hold to the belief that our Federal Government doesn’t have a revenue problem; but, rather, an out of control spending problem! Excessive printing, and spending, of money, by our Federal Government, and the subsequent inflation that follows, sadly, is the result of failed fiscal and monetary policies by our Federal Government; and, which, in this current crisis, could bring our country dangerously close to insolvency!