Will our next administration adjust taxes to make up for inflation?
Cost of living keeps going up year by year, which means labor and materials cost go up as well. Do we keep voting in tax bonds for infrastructure projects? Do we increase the tax rates for everyone to make up for the govn`t, and it`s employees pay and benefits? How can we do both? As a conservative I hate taxes, but I wonder how we can keep this going the way COLA keeps going up?
- Anonymous1 decade agoFavorite Answer
I don't think you have to worry about inflation. Sure, commodities did spike as the housing market collapsed and then the banks started to run into trouble, but that was all speculation on the part of people with capital trying to latch onto a next-possible bubble to get better returns than T-bills offer.
Given the state of the global banking system and the US economy, what is more likely is that there will be stag-deflation (stagnant economy and low inflation or mild deflation). We are hoping to avoid outright deflation.
As for basic macro economics, the beauty of a progressive income tax is that if there is inflation, then higher tax brackets act to slow inflation, so as wages inflate, taxes slow the economy from overheating and turning into a hyperinflationary economy.
However, if we get deflation, then wages remain stagnant or decline and unemployment rises, and then you wind up running larger deficits due to dropping tax proceeds, so a progressive tax system acts to reduce taxes as wages drop at the cost of deficits.
So if we get deflation, then taxes decrease, and this has a stimulative effect (with the marginal propensity to consume being largest as you work your way down the wage ladder).
I mentioned deficits because when they get very large, then interest on them becomes a significant share of the GDP, and that means a larger and larger chunk of tax receipts do not get spent in a manner that generates consumer demand.
- Charles & WillaLv 51 decade ago
Both candidates want to reduce taxes. McCain wants to reduce taxes on the rich. Obama wants to reduce taxes on the poor and Middle class. Obama also wants to remove the Bush tax breaks 4 the rich ,penalise companies who send jobs overseas,and reward those who keep jobs in the USA. Bond issues are mostly local and state and have nothing to do with the fed govt. Getting out of Iraq will save a lot of $. LOwer energy prices ( If they hold up) will go a long way to help lower the cost of everything.
- 4 years ago
Both partys are to blame....This is what happened Clinton balanced the budget. Everybody was making money and they had money to spend. Along comes the mortgage brokers: Telling the Smiths to come on buy this house, yes you can afford it. and when the arm changes you can always refinance, Homes where apprisals high so that the brokers could get the loans pushed though. So the houses were bought, cars were bought, everything is going good. The Smiths were good credit risks. Paid their bills every month on time. Then it happened. The arms went up, The Smiths could not refinanced as promised. Gas prices went up, in turn, everything went up except paychecks in fact Ms. Smith lost her job. So now they have a high mortgage to pay, kids to feed and a car note. The Smiths did everything they could to maintain. Cutting back on the luxary items so that they could continue to pay their bills. Now there is no more luxary items to cut, so they take Mr. Smiths check pay the mortgage, car note and utitlities, and paying as much as they can on their credit cards but each month the credit card balance goes up because they use their credit card to eat, and the interst rate has gone up. Now they are receiving phone calls about their bills, their car gets repoed and now they are looking at foreclosure so what do they do back file bankruptcy. Because this is going on throughout the country there are empty homes on every street. Repoed cars sitting on every lot, and the credit card companys are hurting. When these companys hurt it hurts all, small business can not get loans, so small companies must close their doors which means more people are laid off. These people can't make their bills and soon or later it will begin to hurt the big companies. The other night I was watch one of the news if they were to give every household in the united states $10,000 to pay their bills, it would equal to to 700 billion they want to give to the bailout. If we could pay our bills it would stop the need for the bail out and at least we would have a say on who gets the money.
- BaccheusLv 71 decade ago
Inflation is built into tax rates. If you pay 25%, your tax goes up as your income goes up. There are other factors, such as continued war and ongoing entitlement budgets, that may require tax rates to go back up to where the were during the booming surplus years.
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- Anonymous1 decade ago
Inflation has been very low for a decade now. The last time we had inflationary pressure was during the Carter Administration. Oil prices and the trickle down effect to basically every other item we purchase is the main culprit. We need more oil produced here in America as well as natural gas, nuclear, and solar.
- 45 autoLv 71 decade ago
Wait till there 4 12 packs for $10.00 is a start> Vote B O and lower tax rates so you pay more> Have to spread the wealth> And support the welfare>
- Anonymous1 decade ago
WITH THE LARGEST DEFECT IN OUR COUNTRIES HISTORY
UNDER REPUBLICAN RULE.
WITH THE WAR DEBT OF TRILLIONS OF DOLLARS
WITH THIS BAIL OUT TO THE RICH AND INFAMOUS
ON WALL STREET.
WHAT IS LEFT FOR AMERICA
FROM OUR HARD EARNED TAX'S ?
As a Democrat I do not like tax's either
BUT SEVERAL GENERATIONS WILL BE PAYING FOR THE BUSH REPUBLICAN RULE
- JayLv 71 decade ago
From an economic standpoint, inflation is desirable. The problem is when it outpaces wages.
Right now, we're trying avoid deflation.
- 1 decade ago
We need to either put a cap or lower their salaries.The sad reality is Somebody is going to have to pay more taxes if we hope to get out of this mess regardless of who you support.
- KarKLv 51 decade ago
NO!!!! The Obama administration will adjust taxes - for you having TOO much money.Source(s): "Spread The Wealth" - Barack Obama