The Unreported Cause Of InflationSep 09, 2008
Everyone is concerned about inflation and well they should. It's a debilitating monetary disease that cripples the value of money: One can earn more money in a given period but still have less purchasing power when inflation infects the economy. It hurts working families and endangers what parents can provide for their children. Inflation comes in many forms, such as commodity-based inflation (such as what we are experiencing now with oil prices affecting almost everything type of product). Economists are good at tracking the causes of inflation and how much those causes tack on to the prices we eventually pay at the cash register. Then there are the demagogue politicians who scream for windfall profit taxes to punish companies that charge to keep up with demand for their products while ignorantly using the phrase "windfall profits." (Hint: it doesn't mean "large profits.")
However, in all the media circus, what never gets reported is the biggest cause of price increases: Taxes. That's correct. The largest percentage cost of most items is the added cost created by excessive taxes. Unfortunately, economists never factor taxes into inflation rates.
Cable Television Service: 46.3%
Cell Phones: 46.4%
Hotel Rooms: 50%
Car Rentals: 60.6%
Soft Drinks: 37.6%
Restaurant Meals: 44.8%
Landline Phones: 51.8%
Domestic Air Fare: 55%
The figures include the cost of sales taxes, corporate income taxes, payroll taxes, property taxes, capital gains taxes, unemployment insurance taxes, workmen's compensation taxes and other payments to federal, state and local governments. Not that taxes aren't necessary to pay for necessary and proper functions of government, but is there any excuse for government to punish its citizens by limiting their ability to save, invest and spend their hard-earned money for what they want and for how they want to provide for their families with such excessive ad-ons to the actual production and service costs of a product?
So with all the speechifying about making "corporations pay their fair share" be aware of how much that fair share is inflation in the form of high taxes. Let's call that government-inflicted tax inflation.