The Hidden Tax That’s Draining Your Wallet (And How to Beat It)
Most people know about the taxes they pay—federal income tax, property tax, sales tax. But what if I told you there’s a hidden tax draining your wealth every day, and most people don’t even see it coming? It’s called inflation, and it’s arguably the most dangerous tax of all.
Let’s start with the obvious.
The 10 Visible Taxes You’re Already Paying
During our recent discussion, we broke down 10 types of taxes Americans regularly pay:
- Federal income tax
- Payroll taxes (FICA)
- Capital gains tax
- Sales tax
- Estate tax
- Tariffs (which raise the price of imports)
- Property tax
- Corporate tax (which is passed on through prices and wages)
- State and local income taxes
- Miscellaneous taxes – tolls, lottery tax, cigarette tax, alcohol tax, etc.
Let’s put that in real numbers. A Michigan resident earning $100,000 a year pays:
- $13,800 in federal income tax
- $7,650 in payroll taxes
- $4,000 in state income tax
That’s over $25,000 in taxes before a single dollar hits your checking account.
But that’s not the whole story.
Inflation: The Tax You Never See Coming
Between 2020 and 2025, inflation rose 24.8%, but wages only rose 20%. So even though you technically earn more, your purchasing power dropped. You’re working harder and getting less.
Look at this historical data from 1971 to 2021:
- Car prices rose 840%
- Home prices rose 1,200%
- College tuition? A staggering 2,000%
- Meanwhile, median household income only rose 600%
So what’s going on?
It’s not just the cost of living. It’s the cost of a system fueled by debt and money printing.
Government Debt = Your Inflation
The U.S. government consistently spends more than it earns from taxes. To fill the gap, it borrows from individuals, foreign nations, and the Federal Reserve—which, in turn, prints more money to make the loans.
In 1975, the national debt was $500 billion.
In 2025, it’s $36 trillion.
Every new dollar printed reduces the value of the dollars already in your wallet. Prices go up, but your savings and wages don’t keep up. That’s how inflation becomes a hidden tax—you pay for it without ever seeing it on a statement.
How the Rich Reduce Their Tax Burden
Here’s where the game changes: Investors play by a different set of rules.
- Employees pay income tax up to 37% and payroll taxes.
- Investors pay just 15–20% on long-term capital gains.
- Business owners get to spend first, then pay taxes—deducting expenses before the IRS gets its cut.
Want to stop getting crushed by taxes and inflation? Don’t just earn money—invest it.
Why You Need to Be an Investor
The S&P 500 rose:
- 90% from 2020 to 2025
- Over 4,000% from 1971 to 2021
That’s not a typo. While wages have barely kept pace with inflation, the stock market has massively outpaced both. That’s why investors get richer over time—even while the rest of us are struggling to keep up.
If you want to build real wealth, you can’t just save money. You have to grow it.
The Key Is Financial Education
Understanding how money, taxes, and inflation work isn’t optional anymore—it’s essential. Otherwise, you’ll continue to lose ground even while doing everything “right.”
That’s why I always recommend:
- Reading daily market updates (like the Market Briefs newsletter)
- Taking a basic investing masterclass
- Learning how to evaluate stocks, ETFs, and passive income strategies
The economy is rigged in favor of the informed. If you stay in the dark, you’ll be stuck paying both visible and invisible taxes for the rest of your life.
Final Thoughts
You don’t need to be a millionaire to start investing. But you do need to start thinking like one.
Shift your mindset from consumer to investor. From employee to owner. From taxpayer to strategist.
Because in today’s world, the biggest threat to your wealth isn’t how much you make—it’s how much you lose without realizing it.
Jaspreet Singh is not a licensed financial advisor. He is a licensed attorney, but he is not providing you with legal advice in this article. This article, the topics discussed, and ideas presented are Jaspreet’s opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence.
