Inflation vs Taxes
Some entreprenuers fear that Barak Obama might increase tax rates if he gets elected. But is it any different than what we just lived through? One savvy commenter recently stated “One party will strangle us with taxes, the other will strangle us with inflation. Care to tell me the difference?”
Barrons recently published an article titled Spinning a Grand Old Fantasy, highlighting how the Republican party has become the party of big government and socialism (at least for the rich):
Democrats are depicted as the party of big, intrusive government, willing to “ignore fiscal problems while squandering billions on ineffective programs.”
The GOP, however, has no moral legs to stand on when it hurls such insults.
The Bush administration has bailed out Wall Street, and stands ready to bail out mortgage giants Fannie Mae and Freddie Mac — in the process abetting a slide into more intrusive government. If we are headed down the road to socialism, then the GOP can be credited with setting the pavers.
Because inflation happens, we just assume it is part of the economy. We typically do not lay blame on anyone for inflation – except in some cases claiming merchants are greedy, but that statement misses the cost of inflation and who controls it – inflation is largely controlled through the money supply. Grow the federal debt and money supply faster than the population and you have inflation. Inflation is an intentional economic strategy, one which had no lasting role in our economy from 1776 to 1913, but has been present ever since the Federal Reserve was created
| Taxes | Inflation | |
| Income | Only hits you after your business expenses are paid and you have reinvested in growth. It only touches a small part of the business, while the core business is allowed to grow logarithmically untouched. | Hits the first dollar you earn and the first dollar you spend. Affects every dollar of profit as well as all the other money associated with your business and your personal life. |
| Earnings vs savings | Only takes from your earnings. Does not hurt your savings. | Robs from your earnings and cash savings. Forces you to make risky investments with your savings if you want to outpace inflation. |
Chris Martenson has a great video on inflation.