Category: Higher Taxes Tomorrow? Part 2
The following is the second reason and Part 2 of why I know inevitably we will be paying higher taxes in the future:
Inflation has been averaging around 3% per year for the past couple of decades. The Rule of 72 says that whatever interest rate your money is earning, divide that into 72 and that will tell you how long it will take for your money to double. Dividing the Inflation rate of 3% into 72 equals 24. That means that in approximately 24 years, the $1 price of an item will double and consequently cost $2. That may not seem like a lot. However, for someone in their twenties, an automobile that costs $20,000 today may cost $40,000 (24 years from now) when they are in their forties. Around the time they are 70, this automobile could very well cost them $80,000! Yes, that is 4 times today’s cost. Their actual income will therefore probably have to be approximately 4 times what it is today just to maintain today’s lifestyle tomorrow. And, someone in their twenties today typically has fewer expenses than someone in their thirties or forties. Translated, more income equals a higher (income) tax bracket!!!
Stay tune for the final reason in this three part blog.