Deflation is Your Friend: Entry I
The Government, through coordinated public policy, punishes savers. One effective tactic for reducing the value of thrift is the promotion of deliberate inflation which relentlessly erodes accumulated capital.
As if the intentional destruction of private savings isn't sufficiently immoral, Capital Gains Taxes are confiscatory. Any American who recoups a capital gain on an investment is the victim of unqualified thievery.
The reason being that Capital Gains Taxes do not account for inflation. The value of invested savings might only increase at the rate of rising prices, but this mere preservation of capital is viewed as a net gain by the Government, and is taxed.
Deflation is your friend not only because it steadily increases the value of accumulated savings, it also has the opposite effect of inflation relative to the deeply flawed tax code.
In a deflationary world all capital gains are real, not imaginarily contrived by the economically illiterate Government. Furthermore, and in my estimation a positive, the gain in value attributable to deflation is shielded from Capital Gains Taxes.
Inflation is the public policy preference of our elected officials partly because they enjoy spending other people's money, and steadily rising prices increase tax revenues in a fundamentally unfair manner.
Deflation is your friend.
Deflation is your friend if you're a saver, inflation is not your friend if you're a borrower. As governments are constant borrowers is it any wonder they not only prefer inflation, but set it as their goal at around 3 percent?
I think your entry might benefit from a concrete example. If I may be presumptuous, here is one:
Say I invest $100k. This returns 5% in a year. I have $105k at year's end. This seems like a $5k profit. But if inflation is 5% that $105 is now worth in buying power the $100k I initially invested a year before. I have only broken even.
However, the taxman doesn't see it that way. They count numbers of dollars not worth. To them I made $5k and am taxed on it. So my $105 is cut to say, $103k, which because of inflation has less buying power than the $100k I invested to begin with. In the end I have lost buying power, actual worth. Do this for 20 years and you can imagine how much less your initial investment is worth even when "keeping up with inflation."
It's an inflation windfall tax. Again, is it any wonder the government encourages inflation?
TM Colon
ps. Good and informative site, btw.
As bad as capital gains taxes are in an inflationary era, I think the very concept of property tax is worse. I mean, every year you have to pay property tax. And if you don't pony up the government takes your property from you. In effect you are renting the land from the government... and the lease runs forever. Makes you wonder about the validity of the underlying principle behind property tax. Though it's been around so long, nobody does.
Can you imagine if we applied the principle of property tax to other classes of property? Say, furniture for instance. How would people feel about paying an annual furniture tax so they can keep their living room suite? One imagines they'd think that pretty weird if not outrageous. Yet with land, they don't see a problem.
Let's take it a step further, what if you applied the same principle to money. That's a type of property. How would folks react if the government taxed their savings at 2% a year? One might imagine mass protests. Yet with land, which is not necessarily generating any income or changing in value, nary a peep when the taxman takes his cut.
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TM,
I have thought about the principle behind property tax, and I certainly find it more agreeable than the tax on, say, labor/wage-income.
You are correct to say that a property 'owner' only rightly 'rents' an ownership privilege from the government. Don't ever forget however, that the abstract notion of territorial 'ownership' is at its roots only ever an 'agreement' secured by force of arms. The natives of your continent will surely attest to the validity of this 'underlying principle'.
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