Inflation is a Tax

In his essay The Elements of a Fair System of Taxation, written in 1982, Ridgway K. Foley Jr. writes the following:

“Surely, inflation constitutes the most invidious and unfair tax of all. We properly call inflation a tax because it results strictly from governmental meddling with the market system. Ancient monarchs clipped coins and practiced other petty debasements. Our government for many decades has ruled by deficit spending and, when the powers that be wish to fund their little schemes, they debase the currency (no longer bound by the market laws associated with the gold standard) by churning out tons of paper dollars. The increase in the federal money supply causes the phenomenon we label “inflation”: the more dollars in circulation relative to the value of created goods and services, the less each individual dollar is worth and the more dollars it takes to purchase a given good or service.[5]

Inflation operates as the cruelest tax of all because (1) it is not labeled as a tax, (2) it penalizes the thrifty, and (3) although occasioned by government policies, the politicians habitually blame other alleged causes and thus misdirect the anger and corrective powers of the citizens. One cannot imagine a more unjust situation than a hard-working laborer who, by thrift and foresight, saves up to $50,000 during his working life, by forgoing luxury expenditures and restricting his consumption, in order to provide for his family when he is too old or too ill to work, only to discover that his hard-earned fund will only buy $5,000 worth of goods. Yet that is precisely the result according to the decline in the dollar purchasing power since World War II.[6] Outright thievery would seem less painful.”

Read the entire essay here,


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