(CNS News) -- A new report by Sen. Rand Paul (R-Ky.), the Ranking Member of the U.S. Senate Committee on Small Business and Entrepreneurship, details how $4.9 trillion in COVID stimulus spending has produced one of the highest levels of inflation in U.S. history.
It also explains how this "hidden tax" disproportionately "harms low and middle-income families" and small businesses.
“$4.9 trillion in COVID-19 stimulus spending has led to one of the highest and most sustained levels of inflation in U.S. history," said Sen. Paul in a press release. "While government stimulus spending was intended as a form of relief, and low and middle-income families as well as small business owners were promised that their taxes would not increase, Americans everywhere are now paying a hidden tax called inflation."
“In recent months, prices on nearly everything from gas, food, and clothes to electricity, car prices, and rent, have all increased, and unfortunately it's only going to get worse," said Paul, a medical doctor.
"Congress needs to realize that further spending at this time of rapidly rising prices is only going to continue the trend of rising prices on this nation’s already vulnerable businesses and families," he added.
In the report, The Hidden Tax: Inflation's Effect on Americans and Small Businesses, it shows that the Consumer Price Index (CPI) -- average price of a basket of consumer goods -- rose 7% in the 12 months prior to December 2021.
"This represents the largest increase in a 12-year period in the last four decades," states the report.
In addition, the Producer Price Index (PPI), released on Jan. 13, "found that prices for businesses had jumped 9.7 percent in 2021, the largest calendar year increase in prices for businesses in the history of this index," reads the report.
Americans see the consequences of these price increases. For instance, compared to one year ago, the cost of gasoline (all types) has risen 49.6%. A tank of gas cost about $25.32 in December 2020. In December 2021, it cost $38.04.
The price of used cars and trucks has gone up 37.3%; new cars and trucks, prices up 11.8%; electricity and food both up 6.3%; and rent on a primary residence is up 3.3%.
These hidden taxes -- inflation -- disproportionately affect low and middle-income families because they "spend a larger portion of their income on high-inflation items, such as gasoline, used cars, and food," according to the report.
"Families in the lowest income quartile spend nearly 40 percent of their annual income on these three categories," states the report. "As a means of comparison, families in the top quartile spend only 10 percent of their annual income on these categories."
A recent Gallup poll, cited in the report, found that "70 percent of those earning under $40,000 annually reported moderate or severe hardship as a result of inflated prices in the last year compared to 28 percent of those earning over $100,000 annually."
As for inflation's effect on small businesses, the report says, "82 percent of small businesses reported raising prices in the last several months, [and] 42 percent reported raising prices by 20 percent or more."
In addition, "45 percent of small businesses reported taking out a loan to cope with the pressures of inflation in this last year," said Sen. Paul.
In conclusion, The Hidden Tax report states, "Though government stimulus spending [$4.9 trillion] was intended as a form of relief, and low and middle-income families as well as small business owners were promised that their taxes would not increase as a result of these packages, Americans are now paying a 'hidden tax' for these policies.
"This price of these measures is high to all, but low and middle-income households and small business owners are responsible for a higher share than their wealthy counterparts.
"Further spending in this time of rapidly rising prices is to impose an even higher tax on this nation’s already vulnerable small business owners and low and middle-income families. In the words of Milton Freidman, there is no such thing as a free lunch."