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Actually, inflation is progressive because the rich in general have more in savings than the poor. But it also punishes behavior that is "good" (though worse f

Actually, inflation is progressive because the rich in general have more in savings than the poor. But it also punishes behavior that is "good" (though worse for the economy). For 2 people of the same income, if one saves a lot of his money and the other spends most of his, thus getting tangible assets (maybe a nicer house) instead of money, the spender will be a lot less affected by inflation than the one who has a lot of money in savings. (Though if most of his money is in stocks, it should roughly grow with inflation.)

startuprules 17y ago
the rich already escaped from dollar to tangible goods such as gold/silver/food/water supplies/farm/private island/'protection' the rest of us have electronic 0s and 1s stuck in 401k and propped up real estate prices
teilo 17y ago
That is non sequitur. A tax is not progressive simply because some people pay more takes than others. Inflation lowers the value of any give dollar in a wealthy man's bank account as equally as the same dollar in poor man's account.
- jackowayed 17y ago
  The definition of a progressive tax is that as one's income goes up, the percentage of one's income that one pays in that tax goes up. This tax isn't perfectly progressive because it depends on people's exact behavior and by investing rather than just having it in a savings account, the rich can sort of have their wealth increase in value with inflation, but it is the case that extremely poor people with no savings barely feel it, while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value.
  - anamax 17y ago
    > but it is the case that extremely poor people with no savings barely feel [inflation], while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value. Poor people's wages don't necessarily increase as fast as the cost of things that they buy. If their wages fall behind, they lose. BTW - "rich people" don't keep an appreciable fraction of their money in checking and savings. They keep their "cash equivalents" in things that have higher yields during times of inflation. (I think that TPS bond funds already exist, providing both liquidity and the inflation-protection of TPS bonds.) Money market interest rates were fairly high during the last time of significant US inflation.
  - teilo 17y ago
    Yes, you are correct on your definition. But arguing that the rich get taxed at a higher percentage by inflation than do the poor is silly. If the poor have no savings at all, then you are correct in they have nothing to lose but incorrect in that this equates to a progressive tax. That's like saying that a man with no money has a lower tax rate. He has no taxes at all. By your definition ALL taxes are progressive, but of course that's not true. Many poor people do save, and inflation causes what they save to lose value at exactly the same rate as the money saved by the rich. If anything, by your definition, inflation is a regressive tax, meaning that the poor are taxed more than the rich. The rich tend to be good at profiting from inflation, as you noted.
lsc 17y ago
Historically, people have agreed with you... the free silver party was all about creating inflation so that debtor farmers could pay off their (presumably fixed-interest) debits with cheaper money. However, I think that the rise of the variable-rate loan means that inflation no longer helps debtors nearly as much as it once did. Also, for those working for others (rather than selling commodities directly, as the farmers during the free silver movement) ones paycheque does not always keep pace with inflation. The rich don't keep their assets in dollars, they keep them in things like stocks and realeastate, which tends to float with inflation. Inflation hits the middle/upper middle class by bumping us up in income tax brackets. If you are fortunate enough to have skills that are in demand, you can expect your wage to rise with inflation, however, tax brackets move much more slowly, so you end up paying more in taxes. As for the lower middle/lower class folks, people who aren't in high demand jobs, well, their pay quite often lags inflation by quite a lot. (in fact, some people see this as a positive of inflation. It's very difficult to issue pay cuts to employees without major morale issues. In inflationary times, simply not issuing raises does the same thing in an almost passive way. Good or not, it's no fun for the worker who sees his buying power shrink.) Of course, inflation hurts those on fixed incomes the most. Who knows? this might be our way out of the social security mess? but yeah, it's going to suck for the people depending on that cheque. So yeah, personally, I think that this idea that inflation helps the little guy is... outmoded.

startuprules 17y ago

the rich already escaped from dollar to tangible goods such as gold/silver/food/water supplies/farm/private island/'protection' the rest of us have electronic 0s and 1s stuck in 401k and propped up real estate prices

teilo 17y ago

That is non sequitur. A tax is not progressive simply because some people pay more takes than others. Inflation lowers the value of any give dollar in a wealthy man's bank account as equally as the same dollar in poor man's account.

jackowayed 17y ago
The definition of a progressive tax is that as one's income goes up, the percentage of one's income that one pays in that tax goes up. This tax isn't perfectly progressive because it depends on people's exact behavior and by investing rather than just having it in a savings account, the rich can sort of have their wealth increase in value with inflation, but it is the case that extremely poor people with no savings barely feel it, while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value.
- anamax 17y ago
  > but it is the case that extremely poor people with no savings barely feel [inflation], while rich people will see some of their money (money in checking accounts, savings accounts, etc) lose its value. Poor people's wages don't necessarily increase as fast as the cost of things that they buy. If their wages fall behind, they lose. BTW - "rich people" don't keep an appreciable fraction of their money in checking and savings. They keep their "cash equivalents" in things that have higher yields during times of inflation. (I think that TPS bond funds already exist, providing both liquidity and the inflation-protection of TPS bonds.) Money market interest rates were fairly high during the last time of significant US inflation.
- teilo 17y ago
  Yes, you are correct on your definition. But arguing that the rich get taxed at a higher percentage by inflation than do the poor is silly. If the poor have no savings at all, then you are correct in they have nothing to lose but incorrect in that this equates to a progressive tax. That's like saying that a man with no money has a lower tax rate. He has no taxes at all. By your definition ALL taxes are progressive, but of course that's not true. Many poor people do save, and inflation causes what they save to lose value at exactly the same rate as the money saved by the rich. If anything, by your definition, inflation is a regressive tax, meaning that the poor are taxed more than the rich. The rich tend to be good at profiting from inflation, as you noted.

lsc 17y ago

Historically, people have agreed with you... the free silver party was all about creating inflation so that debtor farmers could pay off their (presumably fixed-interest) debits with cheaper money. However, I think that the rise of the variable-rate loan means that inflation no longer helps debtors nearly as much as it once did. Also, for those working for others (rather than selling commodities directly, as the farmers during the free silver movement) ones paycheque does not always keep pace with inflation. The rich don't keep their assets in dollars, they keep them in things like stocks and realeastate, which tends to float with inflation. Inflation hits the middle/upper middle class by bumping us up in income tax brackets. If you are fortunate enough to have skills that are in demand, you can expect your wage to rise with inflation, however, tax brackets move much more slowly, so you end up paying more in taxes. As for the lower middle/lower class folks, people who aren't in high demand jobs, well, their pay quite often lags inflation by quite a lot. (in fact, some people see this as a positive of inflation. It's very difficult to issue pay cuts to employees without major morale issues. In inflationary times, simply not issuing raises does the same thing in an almost passive way. Good or not, it's no fun for the worker who sees his buying power shrink.) Of course, inflation hurts those on fixed incomes the most. Who knows? this might be our way out of the social security mess? but yeah, it's going to suck for the people depending on that cheque. So yeah, personally, I think that this idea that inflation helps the little guy is... outmoded.