Inflation is the equivalent of a tax increase.
With a tax increase, the government takes more of your money, leaving you a fewer number of dollars, so you have less to spend on goods and services that you need and want. With a tax increase, the government gets more money to spend on things that the government wants, sometimes smart things, sometimes really stupid things.
With inflation, the value of your dollars gets smaller, so you are less able to spend on goods and services that you need and want. With inflation, the government spends more on things that the government wants, sometimes smart things, sometimes really stupid things.
There is more than one cause of inflation, but by far the most important is when the government increases the supply of money. In February 2021, “m3,” the most accurate tally of how much money there is in the United States was $19,669,800,000,000. Most money is not in the form of paper bills nor metal coins. Most money is in the form of numbers in various savings accounts, checking accounts, mutual funds, IRAs, investment firms, and similar accounts.
Soon, the Administration is planning to spend an extra $6 trillion over our “normal” spending. That would increase m3 by 30.5%. So, during this spending spree, we should expect the value of each dollar to decrease by about 30%. This will affect all money; cash, savings accounts, checking accounts, mutual funds, IRAs; everything that is measured in dollars. For many persons, the number of dollars they have will go up, while the value of each dollar falls. The government then gets to charge you income tax on the amount that your number of dollars increases.
The Administration has promised not to raise taxes on anyone earning less than $400,000 per year. But inflation taxes everyone who owns any money in any form.
Ralph B Blasier