Understanding Your True Inflation Tax
Why is everything so expensive? Prices are rising because of the federal government’s reckless spending, paid for by printing new money that devalues your dollars. It acts like an invisible tax. Heritage’s Personal Inflation Calculator is your tool for seeing just how much more the government has taken.
How to Use the Personal Inflation Calculator
- Choose the standard version for quick results, or the detailed version for more precise results.
- Select your region, subregion, or metro area from the dropdown menu for data tailored to your location.
- Enter your current monthly expenditures in each category or pick from pre-selected expenditure profiles for quick results. All fields need to be filled out for the calculator to work. If you don’t spend anything on a category, enter zero.
- Choose a reference year and month to compare to the present.
Personal Inflation Calculator
Design and Development: Calculator produced by Alexander Frei, Christina Hamm, and Jay Simon. Data compiled by Alexander Frei.
Why You Are Paying More
When the government spends beyond its means, it often prints new money to cover the difference. These new dollars dilute the value of the dollars you own, which forces you to spend more to purchase the same items.
By printing money, the government steals some of the purchasing power of your dollars so that politicians can decide who benefits from it.
You are paying more for gas, groceries, and rent because the government is spending and printing more money.
The next time a politician promises a new government program, remember that the government always has to pay for its spending, whether through more taxes or through more inflation.
Dive Deeper
- The Road to Inflation: How an Unprecedented Federal Spending Spree Created Economic Turmoil
- The Costly Truth About Government “Spending”
- Trouble Paying Your Bills? Meet the Culprit
- Inflation Will Stick Around as Long as the Big Spenders Do
- Congress Needs to Take Its Role in Inflation Seriously
Methodology
All the data come from the Bureau of Labor Statistics’ Consumer Price Index data. Prices are not seasonally adjusted. The complete list of the 579 series used can be found here. Where data are missing, we interpolate linearly to fill the gaps.
The Personal Inflation Calculator combines some items from the Consumer Price Index (CPI) using the relative importance from June 2024, the most recent available at the time of publication. Table 1 shows which items correspond to the inputs.
Table 1: CPI Items in the Personal Inflation Calculator
| Standard | Detailed | Item |
|---|---|---|
| Groceries | Groceries | Food at home |
| Alcoholic beverages at home | ||
| Restaurants | Restaurants | Food away from home |
| Alcoholic beverages away from home | ||
| Rent or Mortgage | Rent or Mortgage | Rent of primary residence |
| Owners’ equivalent rent of residences | ||
| Electricity | Electricity | Electricity |
| Gasoline | Gasoline | Motor fuel |
| Car Payments | Car Payments | New vehicles |
| Used cars and trucks | ||
| Leased cars and trucks | ||
| Motor vehicle fees | ||
| Car Insurance | Car Insurance | Motor vehicle insurance |
| Other | Phone and Internet | Telephone services |
| Internet services and electronic information providers | ||
| Other Utilities | Fuel oil and other fuels | |
| Utility (piped) gas service | ||
| Water and sewer and trash collection services | ||
| Car Maintenance | Motor vehicle parts and equipment | |
| Motor vehicle maintenance and repair | ||
| Other Home | Tenants’ and household insurance | |
| Household operations | ||
| Household furnishings and supplies | ||
| Health | Health insurance | |
| Medical care commodities | ||
| Professional medical care services | ||
| Hospital and related services | ||
| Clothing | Apparel | |
| Recreation | Recreation commodities | |
| Recreation services | ||
| Computers | Information technology commodities | |
| Education and childcare | Tuition, other school fees, and childcare | |
| Education and communication commodities less IT | ||
| Travel | Public transportation | |
| Lodging away from home | ||
| Car and truck rental | ||
| Other | Other goods | |
| Postage and delivery services | ||
| Other personal services |
The calculator derives a personal inflation rate by using individual expenditures to re-weight the component series of the CPI. The user enters current expenditures for each category in the base period, which is taken as the most recent period available in the data.
The user’s budget in the base period defines expenditure weights,
\( w_i = \frac{e_i}{\sum_m e_m} \)
Where \( e_i \) is the expenditure on category \( i \) in the base period and \( \sum_m e_m \) is the total expenditure in the base period.
The personal price index is a weighted average of the price indexes for each category,
\( P_t = \sum_i w_i \ C_{i,t} \)
Where \(C_{i,t}\) is the CPI value for series i at time t.
The personal price index can be used to calculate what it would have cost to buy the bundle from the base period using the prices from other periods. The historical cost for the user’s personal bundle is:
\( E_t = \sum_m e_m \times \frac{P_t}{p} \),
Where \( p = \sum_i w_ic_i \) is the personal price index in the base period and \( c_i \) are the component CPI values in the base period.
Values in the pre-selected expenditure profiles are representative figures based on the 2022 Consumer Expenditure Survey, the most recent available at the time of publication.