Virtual Voices

Nightmares and the secret tax

Economy

You know those nightmares in which you've forgotten to do something really important? A midnight specter haunts me periodically-I dream that I've forgotten to attend one of the courses on my 1983 college schedule. Faithfully attending classes all semester except for the rogue course, I suddenly realize my stunning 15-week absence. Heart pounding, sweaty, feeling like a dunce, I wake up thinking I have a final exam later that day with no time to prepare. Of course, nightmares aren't real. Or are they?

With April 15 looming, how would you feel if you had forgotten to have payroll taxes withheld all of last year? You'd have a nightmarish tax bill due. This devilish scenario could materialize-an unanticipated erosion of wealth-for millions of Americans even if they fill out their W-4 forms properly. How so? There's a ghoulish stealth tax that's on the rise. Every American pays it whether his or her money is in the bank, the stock market, bonds, a retirement account, or under the mattress.

So what is this secret tax? It's called inflation. Writing for National Review Online last week, Kevin Williamson said if the inflation rate is just 2 percent, this scourge costs Americans about $1.4 trillion per year. In other words, it erodes the value of dollar-denominated assets by $1.4 trillion (e.g., savings and retirement accounts). How do you think Americans would react if Rep. John Boehner and Sen. Harry Reid were to announce a $1.4 trillion tax increase? A public announcement isn't necessary because "[i]nflation is the creation of money by monetary authorities" (e.g., the Federal Reserve), not Congress, wrote Dr. Hans Sennholz in 1979. This new money devalues existing money and prices rise in response. While the average Joe suffers, the federal government benefits by paying off its debt with new and cheaper dollars.

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Predictions about rising inflation are no longer an esoteric exercise. Earlier this month Wal-Mart CEO Bill Simon told USA Today that inflation "is going to be serious" as early as June. Shadow Statistics believes inflation is actually 9 percent, not 2 percent. The precious metals, hedges against inflation, are sending price signals too. Financial Times reported that silver closed above $40 an ounce on Friday while gold hit an all-time high of $1,474. Moreover, commodities guru Jim Rogers told Forbes last week that he expects "agriculture prices to go much, much higher" leading to "more and more social unrest" throughout the world.

Sound like a nightmare? It doesn't have to be. You know the test is coming. Read the news about what the Federal Reserve is doing with the money supply and prepare yourself for a potentially large tax bill called inflation.

Lee Wishing
Lee Wishing

Lee is the administrative director of The Center for Vision & Values at Grove City College.

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