Our Gold Guy
No Result
View All Result
Monday, March 27, 2023
  • Home
  • Finance
  • Business
  • Economy
  • Politics
  • Contact Us
Our Gold Guy
  • Home
  • Finance
  • Business
  • Economy
  • Politics
  • Contact Us
No Result
View All Result
Our Gold Guy
No Result
View All Result
Home Finance

Getting Real About Taxes

by Robert E. Wright
November 26, 2021
in Finance
Getting Real About Taxes

As AIER Research Director Phil Magness recently pointed out, a wealth tax on unrealized capital gains like that recently proposed by the Biden administration would be blatantly unconstitutional. Because the Constitution’s checks and balances have looked tattered of late, and a constitutional amendment allowing such a tax could be ratified, just as the Sixteenth Amendment rendered a federal income tax constitutional, it is important to point out that the suggested tax would also be bad policy because it would increase Americans’ real (inflation-adjusted) tax burden.

The Sixteenth Amendment took effect in 1913, the same year that the government chartered the Federal Reserve System, which went into operation in 1914. Twenty years after that, the US moved off the gold standard and onto a gold exchange standard that ended about forty years after that, ushering in the current free-floating exchange rate regime and a dollar that by design loses value every year. (For details, see AIER’s The Gold Standard.)

The timing of those seminal events is important. America remains under a nominal income tax regime because the supporters of the Sixteenth Amendment were creatures of the gold standard and hence long-term price stability. While they knew that the price level might increase or decrease for a few years, they expected a return to the mean. Had they foreseen a future where the dollar would lose value, never to regain it, they may well have insisted on adjusting income taxes for inflation.

When income taxes are not marked-to-market, by which I mean the price level, major problems result. One, well understood, is called bracket creep. That occurs when taxpayers get bumped into higher tax brackets, or in other words when they must pay a higher percentage of their incomes in taxes solely because the price level went up.

For example, maybe taxpayers had to pay a 10 percent tax when they made $20,000 per year when a liter of Diet Mountain Dew cost $1. In other words, their real salary was 20,000 liters of Diet Dew (20,000/1) and their real tax was 2,000 liters (20,000*.1). But maybe next year, due to inflation and bracket creep, they will have to pay a 20 percent tax on $40,000 even though a liter of Diet Dew now costs $2. In other words, their real salary remained 20,000 liters of Diet Dew (40,000/2) but their real tax jumped to 4,000 liters (20,000*.2).

IRA BERSHATSKY LOVES AMERICA – Most precious metals companies are run by wokesters. Ira’s is not. He is unabashedly AMERICA FIRST and can help you move wealth or retirement to physical precious metals with a gold or silver IRA, or just get metals discreetly shipped to your door. Contact him now.

Ad valorem excises, tariffs, and, most importantly today, sales taxes also creep when inflation hits. With a 7 percent sales tax, a $100 grocery bill costs consumers an extra $7 (100*.07). When consumers have to pay $120 for that same bag of groceries, government suddenly wants an extra $8.40 (120*.07). Yes, government costs have increased too, so its nominal revenues “must” increase, but it takes the extra $1.40 regardless of real incomes, which often lag inflation by months or even years. Social Security and many union contract cost-of-living adjustments, for example, are annual and backward looking, as are many private employment contracts. That is why average real incomes fell in America in October of this year despite the large number of unfilled jobs.

Fixed-income savers are also hard hit by unexpectedly high inflation. In the 1970s, many savers had to pay income taxes on bond or certificate of deposit interest that was less than the rate of inflation. “What good is 8% and even 9% interest on your money on which you have to pay taxes,” one financial broadcaster queried, “when the price of food is going up 20%?” That same journalist, the spunky Wilma Soss (1900-1986), repeatedly called for an inflation tax credit to soften the blow. The Great Moderation in inflation and macroeconomic instability more generally, however, rendered such sentiments seemingly irrelevant.

Inflation, nonetheless, has returned to front page news. Whether transitory in any sense, or the start of something horrific, prices definitely increased much faster than expected in 2021. Government policies — monetary, fiscal, and covidic — undoubtedly caused the price increases. If Wilma Soss were still around, she would wonder aloud why the government should be allowed to benefit from its own mistakes, especially those that fall disproportionately hardest on the poorest.

Now imagine that a tax on unrealized capital gains is in place such that taxpayers owe the IRS two percent of the increase in nominal asset prices. Imagine that a portfolio of stocks worth $100,000 at the beginning of the year is worth $110,000 at the end not because the companies comprising the portfolio are more productive or profitable but solely because inflation is running at 10 percent. A tax of $200 ([110,000-100,000]*.02) would be incurred solely due to inflation. Worse yet, imagine if a portfolio of stocks would have decreased in price due to decreased earnings but increased in nominal terms due to inflation, turning a loss/deduction into a tax liability.

For better or, more likely, worse, our government has chosen not to constrain its ability to increase the money supply faster than money demand, forcing all Americans to live with a unit of account that constantly declines in value vis-a-vis goods and services. The power of compounding means that even small annual losses soon become quite large and periodic bouts of rapidly rising prices, like the present, will certainly recur.

It is high time, therefore, that the federal government recognizes the creepy tax effects of inflation and gets real about taxes. It should forget about taxing unrealized capital gains, compensate victims of its inflationary policies, and begin to inflation-index everything, except of course government salaries and pensions and the federal minimum wage. If Americans must lower their expectations, so too must Washington.

Image by Here and now, unfortunately, ends my journey on Pixabay from Pixabay. Article cross-posted from AIER.

The Biden Regime and Globalists Don’t Want You Owning Precious Metals

Look around. Things aren’t the way they should be. Between Pandemic Panic Theater, Ukraine, food shortages, and a push for Central Bank Digital Currencies, everything you’ve spent your life building and protecting is in jeopardy.

Precious metals are historically the most reliable and safest hedge against economic turmoil. With the Biden regime and globalists enhancing the chaos, it’s important for patriotic Americans to take control of their financial future.

Ira Bershatsky offers consultations to those who want to invest in precious metals. During these consultations, he will match your current financial situation with the best physical precious metal purchases whether you want to rollover your IRA or have coins discreetly shipped to your home. You will not talk to a telemarketer or sales rep. You will talk to a true expert in precious metals with decades of experience helping people protect and advance their wealth.

Fill out the form here and we will schedule a precious metals consultation with Our Gold Guy, Ira.

Schedule a Precious Metals Consultation Today:

Tags: AIEREconomyFinanceTaxesTop Story


Learn more about RevenueStripe...

Bypass Big Tech Censors



Our Gold Guy



MyPatriotSupply


Apple

Check Out This BIG List of “Woke” Companies to Boycott

March 27, 2023
Silicon-Valley-Bank-Collapse-01

FDIC Disguises Bailout as “Purchase” as First Citizens Bank “Buys” Silicon Valley Bank

March 27, 2023
Central Bank Digital Currencies

Why Crashing Banks Will Usher in Digital Currency

March 27, 2023

Recent News

Apple

Check Out This BIG List of “Woke” Companies to Boycott

March 27, 2023

Search

No Result
View All Result

Site Navigation

  • Home
  • Contact Us
  • Finance
  • Business
  • Economy
  • Politics

About Our Gold Guy

This site is dedicated to helping Americans learn more about the economy, business, and politics. Our nation is in turmoil on all three fronts. We want to make a difference.

© 2021 NOQ Report

No Result
View All Result
  • Contact Us
  • Finance
  • Business
  • Economy
  • Politics
  • Contact Us

© 2021 NOQ Report

Session expired

Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.

>