Wednesday, February 22, 2006

Inflation and tax deductions

Suppose you can survive for three days on a hundred dollars, buying items of basic need only. At a later time you realize that you can only survive for two days on a hundred dollars. The loss of one day in your buying power is known as inflation.

To calculate the rate of inflation, take the length of the interval between the two points of your buying power and divide it by number of months in the interval. The only problem is that these days the interval is usually smaller than a month. That is, for calculating the rate of inflation you need multiplication rather than division.

Take a look at your deductions as you do your taxes. Are you able to deduct anywhere near what you could in earlier years? Thus, the President can proudly announce that he did not raise taxes on you! Instead, he has simply denied you from receiving proper refund. We may call this phenomenon the invisible form of inflation.

We have an interesting technique of creating illusions, even though everyone can tell the difference. You have noticed that anymore you are being taxed on certain employer-paid benefits. Evidently this is not raising taxes because it does not apply to those who pay you, nor it applies to the President himself. You and I do not count in the grand scheme of things. Whether we do or do not notice such things is utterly irrelevant.

Well, taxes are used to protect us. For instance, the bridges must be protected because we sleep under them. Thus, our property is being protected. Taxes spent on land security are not for protecting business interests of certain folks in foreign countries. Not at all! The whole purpose of Home security is to protect the homes of the homeless.

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