All Americans Will Experience a Tax Increase

With the Fed and politicians injecting liquidity into the economy like jelly into a donut, what can we expect to come out of all this? While many independently intelligent Americans may have voted for Barack Obama due to his message regarding tax cuts for all Americans (except the ones who worked the hardest and earned the most), one thing that is being overlooked is the hidden tax that an Obama administration and all-leftist congress will place on the heads of all Americans - inflation.

While an income tax is a government action that decreases the purchasing power of the individual, price inflation is essentially no different. With an income tax, money is taken from your gross income to decrease your purchasing power, and with inflation, the government is printing so much currency as to lead to its devaluation, thus the inflation of the price of goods and services, which also hurts an individual's purchasing power. The dollar you earned today does not buy the same amount of product as the dollar you earned six months ago; this is a tax, and everyone who consumes goods and services in the US pays it. If price inflation was 5% last year, and your total income increased 2%, you effectively paid an extra 3% in taxes that will not be listed on your 1040 this year.

It's not all bad news, however. A time of high inflation, for a responsible consumer, can be a great time to save money. With estimates floating around of 7-9% annual inflation over at least the next year, a good way for you to save money is to not buy anything with cash. Instead, buy items using your credit card and pay it off on the next billing statement, being careful not to accrue any interest or penalties. By doing this, you can potentially save up to half a percent on your items. Assuming annual inflation is a conservatively estimated 7%, delaying payment of your goods by one month will place inflation at .58%, effectively making the amount of money you pay for your goods .58% less than they would have been if you would have paid for them in cash one month earlier. Do this for most of your consumer goods for one year, and savings can easily be in the hundreds of dollars. This maneuver also has the added benefit of improving your credit score. In a down economy, banks are generally less apt to loan to people with poor credit ratings or history. Responsibly handling your credit cards and paying off items promptly will do wonders for your credit score, and make your life a lot easier during the recession and even after the economy swings upward.