Liberals Raise Stealth Taxes on the Middle Class – 30 Yr. Mortgages hit 7.5% and Credit Card Rates Up to 30%
Why the Democrat Controlled Federal Reserve Interest Rates are a Tax on Working America – Hitting Women and Minorities the Hardest
By Counselor George Mentz JD MBA CWM ChE Chartered Economist
Inflation remains one of the most persistent economic challenges since Biden became President, and the Federal Reserve’s outdated tool for fighting it—raising interest rates—has become increasingly mismatched to the realities of a modern, credit‑dependent society. Policymakers still claim that higher interest rates slow inflation. But when you examine how households actually live, borrow, and spend in 2026, the logic collapses.
In truth, raising interest rates on credit cards, car loans, home loans, and student loans fails to stop inflation, and it creates more inflation by increasing the cost of everyday life on family’s existing loans. And beyond that, the Fed’s higher interest rates function as a stealth tax on poor and working families, with a final twist: when interest rates raise financing costs of credit card APRs to 26-30%, the federal reserve also unknowingly raises indirect taxes and fees across the United States on the nation’s most vulnerable families.
This is the modern inflation trap caused by the DCFR Democrat Controlled Federal Reserve. Many say the liberal democrats’ goal is to make Trump’s economy look bad but sadly, their high rates are hitting the democrat voters much more than any other group with women and minorities hardest hit.
The Federal Reserve Leadership (2026)
The Federal Reserve Board of Governors and the FOMC —those responsible for setting interest rate policy—currently includes a majority of Democrats and Liberals:
Four Democratic-presidential appointees: Jerome Powell, Philip Jefferson, Michael Barr, and Lisa Cook.
Three Republican-presidential appointees: Kevin Warsh, Michelle Bowman, and Christopher Waller.
Three Democrat Leaning FOMC Members – The other four rotating FOMC voting members are Beth M. Hammack of the Federal Reserve Bank of Cleveland in Cleveland, Ohio; Neel T. Kashkari of the Federal Reserve Bank of Minneapolis in Minneapolis, Minnesota; Lorie K. Logan of the Federal Reserve Bank of Dallas in Dallas, Texas; and Anna Paulson of the Federal Reserve Bank of Philadelphia in Philadelphia, Pennsylvania. It appears that typically 3 of these 4 typically vote with whatever the democrat or liberals want to do to hurt their opponents.
These officials vote on interest rate policy and oversee the system that affects every mortgage, car loan, credit card, and student loan in America.
The National Leadership Context
Because monetary policy interacts with fiscal policy, it is relevant to note the current federal leadership:
- President of the United States: Donald Trump
- Secretary of the Treasury: Scott Bessent
- Speaker of the House: Mike Johnson
- Senate Majority Leader: Steve Scalise
These leaders influence taxation, spending, and regulatory policy, all of which interact with the Federal Reserve’s interest‑rate decisions.
The Old Model: Why the Fed Still Believes Rate Hikes Reduce Inflation
The Federal Reserve’s theory comes from a world that no longer exists. In the 1970s and 1980s:
- Most families didn’t use credit cards
- Student loans were small
- Auto loans were short and inexpensive
- Adjustable‑rate mortgages were rare
- Consumer financing was limited
Back then, raising interest rates mainly affected business borrowing, not household survival. Higher rates slowed corporate investment, cooled hiring, reduced demand, and eventually brought down inflation. It was crude, but it worked in an economy where consumer credit was a minor factor.
The Modern Reality: A Credit‑Saturated Household Economy
Today’s economy is fundamentally different. Americans now finance nearly everything:
- 221 million people use credit cards
- $1.25+ trillion in revolving credit card debt
- $1.7 up to $2.0 trillion in student loans
- $1.6 trillion in auto loans
- Mortgages, HELOCs, ARMs, and personal loans are widespread
- Even phones, appliances, and medical bills are financed on monthly bills at cellular companies and local hospitals and stores.
When the Fed raises interest rates today, it doesn’t “cool demand.” It automatically kills affordability and raises the price of living for tens of millions of families.
Rate hikes now function as price increases
- Credit card APR jumps → groceries, gas, medicine cost more
- Auto loan rates jump → transportation costs rise
- Mortgage rates jump → housing costs rise
- Student loan interest jumps → education costs rise
These are not abstract monetary adjustments. They are direct price increases on essential goods and services. In other words, rate hikes have become inflationary, not anti‑inflationary.
The Hidden Truth: Higher Interest Rates Are a Tax on Working Families
When interest rates rise, the poor and working class pay more for everything they finance. Higher credit card interest = higher cost of food, fuel, medicine, loans, housing, services, and more.
These interest payments are not optional. They are mandatory charges imposed on the people least able to absorb them. In effect, higher interest rates operate like a regressive tax:
- They fall hardest on low‑income households
- They take a larger percentage of poor families’ income
- They transfer wealth upward to banks and financial institutions and offshore lenders to the USA.
- They reduce disposable income without reducing inflation
This is why rate hikes are often called the poor man’s tax.
The Dirty Cherry on Top:
Higher Interest Rates from the Democrat Controlled Federal Reserve Increase Taxes Nationwide and Hit Union Workers Women and Minorities the Hardest.
High credit‑card interest rates — for example, a jump from 14% to 25% and up to 30% — may look like private financial charges rather than government taxes. But in practice, they create a compounding cycle that behaves like a secondary tax on already‑taxed income. When a household’s interest payments rise, more of its after‑tax earnings are siphoned into bank profits and government waste. Those profits are then subject to corporate income taxes, meaning the government ultimately collects additional tax revenue from the same dollars that were already taxed once. The working family’s income is effectively extracted, recycled, and taxed again.
But here’s the part almost no one discusses.
Higher interest rates push up the cost of goods — cars, appliances, furniture, cell phones, tablets, bikes, scooters, electronics — The sales tax may be the same, but the secondary sales tax ie. Financing goes up. So when financing costs inflate that price, the tax bill inflates right along with it.
In short, higher interest rates don’t just raise prices — it creates indirect extra taxes, creating a hidden inflation multiplier that disproportionately harms working families, women, children, the elderly and minorities.
The Contradiction at the Heart of Modern Monetary Policy
If taxing poor and working families doesn’t stop inflation—because their consumption isn’t the cause—then why would raising interest rates on the same families magically slow inflation? It doesn’t.
Both policies reduce disposable income, but only one of them (rate hikes) increases costs and taxes at the same time.
This is a core insight behind the Mentzian Modern Federal Reserve Inflationary Theory (MFRIT): In a credit‑dependent economy, raising interest rates increases prices, increases taxes, and therefore increases inflation.
To put it into perspective, for many middle-class buyers, national auto-loan averages hide the real cost of interest rate financing a used car. Buyers with credit scores around 600–660 may face rates near 14%–14.5%, while those below 600 may face rates of 19%–21% or more.
For example, financing a $20,000 car at 14.9% APR for 72 months costs approximately $421.81 per month, or $30,370.67 over the full loan term. That includes about $10,370.67 in interest alone.
The interest expense is an added 51.9% of the original $20,000 vehicle price. Put differently, before sales tax, title, registration, insurance, or dealer fees, the borrower ultimately pays about 151.9% of the car’s cash price.
At an 8% city sales-tax rate, the $20,000 purchase also creates a $1,600 sales-tax charge. Combining the $20,000 vehicle price, $10,370.67 in loan interest, and $1,600 in sales tax produces an out-of-pocket total cost of approximately $31,970.67 for a used car valued at 20,000 dollars.
If your credit rating is lower and under 600, you pay 20% APR. Then the $20,000 dollar car would cost $34,492, which is about 172.5% of the car’s sales price, before taxes and fees.
Small Business Loans
While large U.S. public corporations can bypass high domestic rates by tapping offshore markets in regions like the Eurozone, Japan, and Switzerland to secure collateralized loans or bonds in the 3.5% to 4.0% range, Main Street small businesses face a starkly different financial reality at home. In stark contrast to these low-cost international options for multinational giants, domestic small businesses relying on popular government-backed SBA 7(a) loans typically encounter variable or fixed interest rates ranging from 10% to 13.5%. This dramatic divide highlights how global capital markets and institutional scale grant large public companies access to credit at a fraction of the cost paid by everyday U.S. small businesses. Thus, the stock market can grow, but the savings for small business and working families may not with high rates.
Tax Free Money for Those Who Don’t Work Equal to up to 140K in Value
In contrast, those on public assistance do not feel the pain like teachers, workers and union members. A person on full public assistance gets “Tax Free” benefits, tax free housing, tax free health care, tax free food and beverage, tax free utilities and in some cases tax free internet and phones. The hypocrisy is huge, and with high interest rates and fees on everything from cars, furniture, housing, to cable TV, some people prefer to take disability than to go back to work.
In today’s economy, an American receiving $85,000 per year in tax‑free public benefits is effectively enjoying the same lifestyle as a worker earning roughly $141,000 in wages. The reason is simple: benefits are tax‑free, while earned income is hit by every layer of taxation — payroll taxes, federal and state income taxes, county tax, and an 8% city sales tax on nearly everything a working family buys. Beyond that, workers must pay full retail for housing, healthcare, childcare, utilities, transportation, insurance, and daily necessities, all of which benefit recipients receive tax‑free or heavily subsidized. When you combine these burdens, the real-world tax wedge on earned income reaches 30–40%, meaning a worker must earn well over $140,000 just to stand in the same economic position as someone receiving $85,000 in tax‑free benefits. This is the breakeven point where, “it simply doesn’t add up to go to work” in some big cities if working cancels the tax‑free benefits that provide housing, food, healthcare, utilities, and education at no cost.
Why the Fed Still Uses Rate Hikes
If rate hikes don’t work, why does the Fed keep using them?
Because:
- Most of the Fed Members don’t know poor people or live on main street and don’t comprehend the effects on a family budget.
- They are not factoring in the totality of added costs on an average American family to their loans, credit cards, school loans, and mortgages.
- Their old models are outdated
- They ignore offshore borrowing markets that are used by big companies.
- They don’t account for how deeply credit is embedded in household monthly survival.
The Fed is thoughtlessly fighting a 2026 economy with 1980 tools.
The Bottom Line and Solutions
Raising interest rates on credit cards, car loans, home loans, and student loans does not slow inflation. It raises the cost of living, raises the totality of fees and taxes on household budgets, amplifies financial stress, and pushes millions of families deeper into debt. Inflation today is driven by supply constraints, corporate pricing strategies, and global shocks—not by the spending habits of working households.
If policymakers want to fight inflation effectively, they must update their models to reflect the modern credit economy that respects family budgets of the bulk of the USA’s 100 million families. Until then, rate hikes will continue to function as inflation accelerators, not inflation cures.
The Solution
Crush the Federal Reserve’s ignorance with new laws, enforcement policies, and tax breaks that limit interest rate impact on working families. A durable solution to MFRIT and modern inflation requires targeted interest‑rate tax relief for working households and targeted work‑related deductions that reduce the cost of earning a living. In a credit‑dependent economy, lowering interest burdens for poor and working families—on credit cards, autos, mortgages, and essential loans—directly reduces the artificial “price inflation” created by rate hikes. Further, the President can tell the IRS to ignore deductions taken by taxpaying workers for commuting, work meals, work outfits, car maintenance etc. Trump can take action as Biden already showed a president can by refusing to enforce various laws and immigration law. At the same time, allowing worker deductions and expenses would finally recognize the real, unavoidable costs that working folks incur simply to participate in the labor market. These targeted tools operate where inflation actually hits: the household balance sheet. Together, interest‑rate relief and work‑expense deductions would strengthen labor participation, reduce financial stress, and counteract inflation at its source by lowering the true cost of living for the people who keep the economy running.
