‘Inflation Tax’ Already Striking CA

JAN. 9, 2011

By JOHN SEILER

Californians won’t have to wait for tax increases, such as the several that could be put before voters in the November election. One proposal is Gov. Jerry Brown’s $7 billion tax increase.

Tax increases already are hitting the state because of inflation, which itself is a tax. The recent numbers show that inflation is much higher than the official 3.4 percent increase in the consumer price index (CPI) for 2011.

Consider how much the Global Food Index has risen in recent years:

As you can see, food has more than doubled in price in recent years. We’ve only seen some of that in California. Most of the increase is slamming economies overseas. It’s a major reason behind last year’s Arab Spring protest that brought down governments.

But it’s still hitting us, as you can see by comparing your grocery bills to those you ran up in previous years.

For example, two years ago I remember buying Target’s Market Pantry brand of bacon, cheap but good, for about $1.39 a pound. Now it’s about $3.25.

The above graph was from a recent UN Report on the World Food Situation.

The U.S. Department of Agriculture also is predicting that food prices will keep rising:

“For 2012, food price inflation is expected to abate from 2011 levels but is projected to be slightly above the historical average for the past two decades. The all-food CPI is projected to increase 2.5 to 3.5 percent over 2011 levels, with food-at-home prices increasing 3 to 4 percent and food-away-from-home prices increasing 2 to 3 percent. While many inflationary pressures that drove prices up in 2011 are not expected to intensify and may even decrease in 2012, retailers have been slow to pass on cost increases to date. Price levels in 2012 will hinge significantly on several macroeconomic factors such as weather conditions, fuel prices, and the value of the U.S. dollar (an indicator of global demand). An end-of-year surge in prices has increased the starting point for 2012 prices, which may reflect more moderate inflationary figures for 2012.”

Actually, I think they’re underestimating the inflationary pressures during an election year. Have to protect the Boss, you know. The quasi-recovery we’re enjoying also could push up prices as people buy more food of better quality.

As ABC News reported last week, a lot of items are increasing in cost, including water, gas, shipping and Starbucks coffee.

Real Inflation Rate

In past articles I’ve cited ShadowStats.com, which compiles more realistic data than the government on unemployment and inflation. The government changed its inflation calculations 20 years ago to reduce perceived inflation, thus letting it cut annual COLAs (cost of living allowances) for Social Security. It was a sneaky way to reduce the impending crisis in Social Security funding.

One of the things they did, for example, was to figure that when the price of something rose, people would switch to a cheaper equivalent. Thus, people would switch from steak to hamburger. But that’s just fudging the numbers to make the government look better.

Today’s official rate of 3.4 percent yearly inflation is shown by the red line, below. But the real rate of inflation, calculated they way they did in 1990, is about 6 percent, shown by the blue line.

If this 6 percent inflation rate continues for California, it means we already will be paying a 6 percent “inflation tax” by November. On top of that, Gov. Brown would impose another $7 billion tax. That would increase state spending from $86 billion to $92 billion, or 7 percent.

It would be a double-tax whammy for Californians: first prices would increase from inflation, then the Brown tax — or some other tax — would slam the state. It’s hard to escape dollar inflation so long as the source of inflation, the Federal Reserve Board, keeps printing too much money.

But people and businesses could keep fleeing California to avoid the high taxes, in the process getting a break from inflation by heading for cheaper areas of the country. For example, moving to Texas not only means avoiding California’s high state income tax rate, which tops out at 10.3 percent, while enjoying Texas’s zero state income tax rate. It also means cheaper gas and beef because Texas Tea and longhorns are two commodities the Lone Star State produces in abundance.

For California businesses and citizens, it’s another nail-biting year of wondering if the great weather really makes up for all the detriments of staying here.

 

 

 

 

13 comments

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  1. Beelzebub
    Beelzebub 9 January, 2012, 12:36

    I recall when the gas prices soared for the first half of 2008 to an average of about $4.60/gal in California. Food prices soared too and, of course, the reason given was transporation costs due to high gas prices. I literally watched food prices at Costco double and triple in that 6 month period. Then in June of 2008 gas prices began to rapidly fall and by the end of the year the average price of gas in California dropped to about $1.70/gal. But I noticed that the food prices did not come down at all. The price of milk, eggs, fruit, vegetables (canned and fresh), fish, meat, etc… remained 2x’s more expensive than at the end of 2007 when gas prices were considerably higher.

    The artificially low interest rates are, in effect, a tax as well, especially on seniors who have their money invested in fixed income investments or interest bearing accounts. The winners are the TBTF banks that get the zero-interest loans that they lend back to the government @ 2%.

    Look at health care costs. Consistently 9% higher per year. No wonder with all the cost shifting and price distortion. Juanita can cross the border and drop her offspring in any American hospital and force the bill on you. Pharma companies can charge you $4 for a pill made in America that any Canadian can purchase for $0.50. And with our aging population medicare financed bypasses and hip replacements will fly off the charts. The question is – how do you keep a medical system afloat when the beneficiaries only contributed $75,000 to the program but take out $400,000 in services? For medicaid most beneficiaries contributed little or nothing at all.

    The art of deception is truly an art and the government is a master at it. As long as they can fool you the games continue.

    Reply this comment
  2. Bob
    Bob 9 January, 2012, 15:18

    Maybe it’s not entirely bad that healthcare is unaffordable.

    Many of these people in medicine today are little more than modern day witch doctors.

    Much of what modern medicine does is useless or worse than useless.

    For instance, most drugs are worse than useless for most people.

    http://www.independent.co.uk/news/science/glaxo-chief-our-drugs-do-not-work-on-most-patients-575942.html

    And doctors and hospitals are one of the leading causes of death in this country:

    http://www.medicalnewstoday.com/releases/41088.php

    http://www.angelfire.com/az/sthurston/Leading_Cause_of_Death_in_the_US.html

    “A definitive review and close reading of medical peer-review journals, and government health statistics shows that American medicine frequently causes more harm than good.”

    98% of medicine has nothing to do with curing disease, reversing the damage done by disease or preventing disease. “Modern” medicine focuses on treating symptons.

    Most doctors are only interesed in throwing pills at their patients.

    As far as healthcare goes, we still live in the dark ages.

    Reply this comment
  3. Bob
    Bob 9 January, 2012, 15:19

    Maybe it’s not entirely bad that healthcare is unaffordable.

    Many of these people in medicine today are little more than modern day witch doctors.

    Much of what modern medicine does is useless or worse than useless.

    For instance, most drugs are worse than useless for most people.

    http://www.independent.co.uk/news/science/glaxo-chief-our-drugs-do-not-work-on-most-patients-575942.html

    (message coninued in multiple posts since you can only post one link per post)

    Reply this comment
  4. Bob
    Bob 9 January, 2012, 15:19

    And doctors and hospitals are one of the leading causes of death in this country:

    http://www.medicalnewstoday.com/releases/41088.php

    Reply this comment
  5. Bob
    Bob 9 January, 2012, 15:20

    http://www.angelfire.com/az/sthurston/Leading_Cause_of_Death_in_the_US.html

    “A definitive review and close reading of medical peer-review journals, and government health statistics shows that American medicine frequently causes more harm than good.”

    98% of medicine has nothing to do with curing disease, reversing the damage done by disease or preventing disease. “Modern” medicine focuses on treating symptons.

    Most doctors are only interesed in throwing pills at their patients.

    As far as healthcare goes, we still live in the dark ages.

    Reply this comment
  6. EastBayLarry
    EastBayLarry 9 January, 2012, 19:01

    Beelzebub, when in 2008 did the “…price of gas in California dropped to about $1.70/gal…”? I haven’t seen it below $3.50 around here.

    Reply this comment
  7. Beelzebub
    Beelzebub 9 January, 2012, 19:08

    Here, EastBayLarry. Go to the 5 year chart. Our memories are typically very short. That’s why all the worthless incumbents keep getting reelected.

    http://www.californiagasprices.com/retail_price_chart.aspx

    Reply this comment
  8. Beelzebub
    Beelzebub 9 January, 2012, 19:20

    Bob,

    I agree. I laugh at all these Americans who claim we have the best health care system in the world. That’s a huge crock of crap. Anybody who has lived in western Europe (not England) or who know’s anything about cost effectiveness or efficiency in global comparative health care understands that our health care system sucks.

    It’s all about the money, Bob. The health care system in America does not serve the best interests of the consumers – it serves the best interests of big business. That’s why we spend 18% of our GDP on health care and get crap in return.

    Reply this comment
  9. queeg
    queeg 10 January, 2012, 08:31

    Inflation is caused by sloth/waste winning over productivity….

    California producers winding down from strategic growth mode to hunching behind tax shelter rocks! Productivity waning…sob!

    Reply this comment
  10. Eric in SR
    Eric in SR 10 January, 2012, 12:39

    And our “great weather” is quickly becoming illusory right now as well. Think of Pinocchio and Lampwick at Pleasure Island. Yes, our afternoon temps up here in NorCal are in the mid to upper 60s. But we’re staring right in the face of yet another drought, as if our Central Valley farmers need any more problems. Should the drought come to pass, I wonder how Sacramento and Washington will foul up the situation.

    Great article once again, and thank you for the shadowstats.com information source!

    Reply this comment
  11. stevefromsacto
    stevefromsacto 12 January, 2012, 09:12

    First off, Beelzebub is spot on in his comments about our health care system. We’re something like 30th in infant mortality, just for one example.

    Second, despite all the whining on this site about how difficult it is for people to prosper here and how entrepreneurs are leaving our state in droves, check this out:

    The Number of Millionaires Increased Sharply in California Last Year

    “There were 10,000 taxpayers in the million-dollar income club during the 2009 tax year – just one-third of 1 percent of all returns – but that number jumped 27 percent to more than 13,000 for 2010, based on tax returns filed in 2011.”

    “The millionaires reported adjusted gross incomes of $22.4 billion in 2009, an average of $2.2 million each. In 2010, the total jumped 30.2 percent to $29.1 billion, with the average remaining virtually unchanged.”

    “Those increases were by far the largest of any income group, the FTB said, while that group’s share of all adjusted gross income increased from 3.7 percent in 2009 to 4.5 percent in 2010, and its share of taxes jumped from 9.5 percent to 11 percent.”

    Reply this comment
  12. Noor
    Noor 13 March, 2012, 04:16

    btw, MarioP, in case Phil doesn’t answer, I have some arwness for your questions to him:And are those who can’t get health insurance for their pre-existing condition or the ones that had their healthcare cut off due to high healthcare bills “undeserving and unwilling to work for it”?- Answer: MEDICAID. All 50 states have it and this person would qualify, if their income was “low” enough (e.g., in NY, $88,000 total household)What would you do if you had cancer and all of a sudden lost your job due to the poor economy, who would insure you then?- Answer: MEDICAID. I was an oncology nurse. I have seen this situation many, many times.What would you do if you had to fork out tens of thousands in medical bills to keep your wife in cancer therapy?- Answer: Hopefully you saved enough for that “rainy day” which costs the same as a new car. Otherwise, get a “paper divorce” and declare that you are not willing to pay for her cancer care. Then she will get MEDICAID. (I’ve seen that many times too, just ask any hospital social worker.)Have you not heard people having to sell their homes to pay for healthcare?- Answer: So what? Is your house more important than the family that lives in it? Owning a house is not so important in the scheme of life. Just be glad you even have a house to sell to help pay for healthcare for a loved one. Get your priorities straight!Where were those god fearing, charitable people to help them out?- Answer: PLENTY. Just ask any hospital social worker. They are a WEALTH of up-to-date information on getting financial and social assistance from foundations/charities set up by RICH PEOPLE TO HELP YOU IN YOUR TIME OF NEED.

    Reply this comment

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