What happens when you have inflation with a high tax rate on the middle class?

[soccerballtux]

Mild/Medium Stagflation?

 

[MagnusTheBrewer]

What middle class?

 

[blackangst1]

What high tax rate?

 

[Slew Foot]

What inflation?

 

[babylon5]

What ahhhh...all asked already

 

[Fern]

Inflation itself will result in a 'tax increase'; it pushes you up into a higher bracket (as well simply being more $'s).

Hence, people have less spending power (after taking into account inflation adjusted after tax dollars, less money to spend).

Then if tax rates are increased, even more reduction in spending power.

This would resulting in a drag on the economy, unless the gov turns around and spends the increased tax amount they recieve.

If taxes are only raised on the wealthy, tp the extent it only reduces their savings (and not spending) the economic drag effect will be minimized. However, since their savings are decreased there may may a negative effect on the stock market (less demand for stocks as they have less to purchase such stocks).

IMO, higher taxes in a recession/depression are a bad idea; should only be done when the economy is 'hot'. You can reduce demand (and inflation resulting from excess demand) by higher interest rates or higher taxes.

I believe our recent inflation was not from excess demand, but from higher energy costs. The inflationary pressures expected from the recent huge gov bailout plans is not yet upon us.

Fern

 

[Special K]

Aren't the tax bracket cutoffs scaled with inflation?

 

[Zebo]

http://www.investors.com/edito...tsec=16&issue=20090220

 

[Fern]

Originally posted by: Special K
Aren't the tax bracket cutoffs scaled with inflation?

Yes, good point too.

My bad.

Fern

 

[Deleted member 4644]

Originally posted by: soccerballtux
Mild/Medium Stagflation?

Revolution.

 

[soccerballtux]

Originally posted by: Fern

Originally posted by: Special K
Aren't the tax bracket cutoffs scaled with inflation?

Yes, good point too.

My bad.

Fern

Not the alternative minimum tax.

 

[soccerballtux]

Originally posted by: blackangst1
What high tax rate?

Not now of course. Later. When SS and Medicare bills come due.

 

[soccerballtux]

Originally posted by: Slew Foot
What inflation?

Not now; later when we get out of this.

If the Federal reserve ends up purchasing 10 year Tbonds.

 

[soccerballtux]

Originally posted by: Fern
Inflation itself will result in a 'tax increase'; it pushes you up into a higher bracket (as well simply being more $'s).

Hence, people have less spending power (after taking into account inflation adjusted after tax dollars, less money to spend).

Then if tax rates are increased, even more reduction in spending power.

This would resulting in a drag on the economy, unless the gov turns around and spends the increased tax amount they recieve.

If taxes are only raised on the wealthy, tp the extent it only reduces their savings (and not spending) the economic drag effect will be minimized. However, since their savings are decreased there may may a negative effect on the stock market (less demand for stocks as they have less to purchase such stocks).

IMO, higher taxes in a recession/depression are a bad idea; should only be done when the economy is 'hot'. You can reduce demand (and inflation resulting from excess demand) by higher interest rates or higher taxes.

I believe our recent inflation was not from excess demand, but from higher energy costs. The inflationary pressures expected from the recent huge gov bailout plans is not yet upon us.

Fern

I agree with everything you say. I'm looking forward into the next 2-3 years when the deflationary pressures decrease; and we have to start paying for SS and Medicare (repeating myself here).

 

[Thump553]

OP: are you researching for a term paper or something? If so, look up the time period from roughly 1967-1980 and tell us your conclusions.

If you are talking about present and near future conditions, we have historically LOW tax rates and deflation is much more of a worry than inflation. Oh, and the middle class is rapidly shrinking as well.

 

[soccerballtux]

Originally posted by: Thump553
OP: are you researching for a term paper or something? If so, look up the time period from roughly 1967-1980 and tell us your conclusions.

If you are talking about present and near future conditions, we have historically LOW tax rates and deflation is much more of a worry than inflation. Oh, and the middle class is rapidly shrinking as well.

No I am not.

I am aware of what happened during the 70s, several things are different this time.

 

[Jiggz]

If you're a liberal nothing! Nothing will happen because you're not supposed to pay taxes in the first place! And secondly for inflation, you don't buy anything anyways for you get it all free from the gov't! Now if you're not a liberal, well standby, the gov't will take every penny and every property you have, so you can be converted into a liberal! And will probably be given the opportunity to marry someone from your own sex!