Robert Kiyosaki had written a nice book named "Rich dad, poor dad". It is one of the best selling books on how to become rich. It inspires to become rich while keeping the values in mind.
In this remarkable book he writes that poor and middle class think that they can punish rich for making big profits. According to him these classes pushed governments to put tax burden on rich. Rich didn't opposed it. Instead they devised means to bypass the burden of tax on middle class. Gradually governments become more and more powerful. Their machineries increased in size. In order to fulfill its expenditures, governments increased taxes. That ultimately squeezed the middle class and ultimately transcended to the poor class.
If you really contemplate on how tax system works, you'll realize that whatever Robert had written in his book is true to a great extent. the Rich know how to ease the burden of tax. Rich have companies which are the means of tax avoidance. The Rich can avoid tax in many ways. They pay taxes after deducting all of their expenses. Then they take loan from banks at lower interest rates after pledging their shares and then get tax relief for the interest they had paid. The Rich are powerful. Whoever is selected as the head of the governments, he is bound to obey the rich. Governments make policies which suits the rich. On the other hand a typical middle class person has to pay tax first and then he is able to spend that money on his basic needs. But, wait! Basic needs like food, cloths, house etc. are not free of taxes. Governments levy indirect taxes on your every purchases. Therefore, a typical middle class salaried has to work for half of the year to pay his tax dues. In spite of paying so much taxes if he is able to save money in banks and gain interest, he has to pay tax on interest received as well, while allowing inflation to reduce the value of the savings.
I have included Benner cycle image below for a certain reason. The USA president Donald Trump has imposed tariffs on imports from other countries. Some Poor and Middle class people of the US may think that it can reduce imports of the US and thus make the companies to come to the US and invest there resulting in increased jobs, savings from cut of imports and increased export opportunities in the US. Is this really going to happen? No, never. Imposing of tariffs will lead to scarcity of goods in the US and the imported goods will become costlier. That will siphon money from the poor and middle class of the US. No company can establish its plants and machinery overnight in the US. That's why it will increase inflation in the US which will lead to recession, resulting in job cuts and further increase in retrenchment. Ultimately, it will lead to depression in the US which will engulf world economy.
We have seen that 1920's Spanish flu like global pandemic repeated in 2020, approximately 100 years of its inception. The great depression of 1929 has passed almost 100 years ago. So, it infers that the great depression may repeat itself after 100 years. Benner cycle also suggest that it may happen this time again.
(Benner cycle)
For more information on Benner cycle, you can read my earlier post. Global economy is already under pressure and Trump's policies will push it to the edge for its collapse. Situation is very grim. We may see a worst time soon. Imposition of Tariffs and taxes are not the solution of economic problems, they are the problems itself.
Thanks!
