This Blog Has Moved!

My blog has moved. Check out my new blog at realfreemarket.org.



Your Ad Here

Wednesday, December 22, 2010

The "Tax Cut Law" Actually Raised Taxes!

This article by Ron Paul on lewrockwell.com was interesting. The "tax cut compromise" law had $850B of income tax cuts, and $60B of spending increases. The $60B mostly went to extended unemployment benefits.

This law actually raised taxes! Do you see how?

SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE
SPOILER SPACE

Suppose that income taxes are cut by $850B, with no spending cuts. The "income tax" is decreased by $850B. At the same time, the "inflation tax" is increased by $850B! The total taxes collected by the government are unchanged. It's one type of tax exchanged for another.

Inflation also bails out the banksters. If there's 10% inflation, that pushes up housing prices. The collateral backing loans increases in value. Suppose you had a $500k defaulted mortgage on a $400k home. If there's 10% inflation, then that home is now worth $440k. The bank's loss was cut from $100k to $60k. If there's enough inflation, then the foreclosed home can be sold for almost the full value of the mortgage. The foreclosure process takes 1-2+ years. That gives inflation time to work its bailout magic. Once the house enters foreclosure, the homeowner can't start repaying the mortgage again, if inflation makes the home worth more than the mortgage.

The law also included $60B more spending. That spending isn't free. It's paid via inflation. If there's an "unemployment benefits extension", that's logically equivalent to "higher taxes for everyone who has a job".

Suppose the President went on TV and said "Every American gets a 2% pay cut every month. Every American loses 2% of their savings every month." There would be rioting. Via inflation, that's exactly what happens. State comedians go on TV and lie and say "Inflation is low!"

The "tax cut compromise" law had $850B of income tax cuts and $60B of new spending. There's no free lunch. This is offset by a $910B increase in the "inflation tax". Nobody in the mainstream media mentioned this aspect of the law, not even Ron Paul.

7 comments:

Anonymous said...

A few months ago I did see a Ron Paul video in which he stated that inflation is another type of tax.

Anonymous said...

True. Although I know about this, I haven't heard anyone saying this, but you.

Anonymous said...

Well, one may say that the spending is going to be done by piling up debt, which would transfer this spending forward to be paid by our children.

In this case, where is the inflation tax?

FSK said...

Anonymous #3 is wrong. When the Federal government has $1T of deficit spending, there is immediate $1T inflation. The money supply is immediately diluted by $1T.

The "national debt" is an accounting fiction.

The banksters also profit via "interest payments on the national debt". Those payments go directly to Goldman Sachs' profits.

Don said...

Debt is a running tally of money stolen from the people through inflation to date.

FSK said...

Don: That isn't exactly true. Total inflation is greater than the national debt.

Inflation is caused by Federal deficit spending.

Inflation is also caused whenever private banks make loans.

Some money is destroyed, via the Compound Interest Paradox. That's the reason the national debt is greater than the money supply.

Via the Cantillon Effect, simultaneously shrinking and expanding the money supply also steals wealth.

Don said...

Yes, I was just trying to highlight the main fallacy about the debt. That is why they call it debt, to confuse, it's the final sleight of the hand.

A bank robber might say he has the debt to the banks. He might run a ledger. He would be more correct, because he didn't counterfeit anything.

A writer of fake checks,is outright lying by showing their (rough) total loot as "the debt".

This Blog Has Moved!

My blog has moved. Check out my new blog at realfreemarket.org.