A payslip lists every dollar withheld, and Treasury records what employers withhold from those pay cheques. A household whose savings lose purchasing power receives no such document.
The Prehn Institute, an independent research institution, makes the case about that missing record in “The Hidden Regressive Tax,” a research report by Felix Nikolas Prehn, economist and former investment banker. The preprint was posted 25 September 2026.
Most of the report measures who gained from money growth. One argument in the paper, posted on Zenodo, asks a different question: why a transfer of that size draws no notice, and why Prehn calls it a tax at all.
The definition comes first
The paper defines a tax as a compulsory transfer of real resources from private parties to the state, or, through the state, to other private parties. Monetary expansion fits that definition in three ways, it states. It erodes the purchasing power of cash, deposits and wages while raising the price of getting into assets, with no offsetting gain for a household that owns none.
A household that holds assets pays the same erosion on its cash but collects a gain on its holdings many times larger, the paper states.
The levy is hidden, in the report’s telling, because it appears in no budget document and on no payslip. The households that pay it see only that prices are higher and that assets they might once have bought are further out of reach.
Prehn does not claim this is a tax in the legal sense. His summary says the effects fall outside what a conventional tax is, and that “No statute sets the rate and no household receives a statement of what it has paid.”
Three tests, none met
The paper lists three ways a conventional tax is visible: a legislature enacts it, the government publishes its rate, and the payer receives a record.
Treasury’s books show what that looks like.
The Monthly Treasury Statement for August 2026 shows about $1.88 trillion of individual income tax withheld from pay cheques in fiscal 2026 through August, a gross figure. Total individual income taxes, net, came to about $2.55 trillion over the same months. Those are legislated dollars, and Treasury records each one.
Monetary expansion fails the first test, the paper states, because no legislature enacts it. It fails the second because no rate is published. The size of the transfer shows up only afterwards, as prices move, so no one can read it off a schedule beforehand.
The paper adds that purchase decisions that expand the money supply are made by a committee of twelve and published as a policy statement. They are never described as a transfer between households, the paper notes, and that silence is part of what keeps the levy out of view.
The paper is careful about what the argument does not say. Monetary expansion was not the only force at work, it states, and supply disruptions and fiscal transfers mattered in 2020 to 2022. The report does not argue that the policies should not have been adopted. Its claim is narrower: whatever their merits, the burden they placed on households was large, and no account of it was ever kept.
The third test is the record. The paper’s example is a household whose deposits lost value as the CPI climbed after January 2021. In its words, “the household whose deposits lost 27 per cent of their purchasing power receives no statement to that effect.”
The burden runs the other way
A progressive tax takes a rising share of resources as resources rise, according to the paper. The levy it describes does the reverse.
The result, in the paper’s summary, is this: the smaller a household’s asset base, the larger the share of its position exposed to the loss, and the smaller its share of the gain.
A dollar lost on a deposit therefore weighs differently in each household’s position. It is a large part of the picture for a saver with little else and a small one for a household whose wealth sits in shares.
For a household saving towards a deposit, the same money growth that erodes the savings also lifts the price of the home. The same account balance buys less, and the home moves further away. Neither change appears on any statement the household receives.
The gain with no bill
The absence of a record cuts both ways, and that is part of why the paper calls the levy hidden. Rising asset prices produce a gain on paper first.
The household whose shares doubled pays no tax on the gain until it sells, the paper states, if it ever does. The household holding deposits has no line anywhere showing the other side of the same movement.
Neither household receives a statement. One holds a gain that waits for a sale. The other holds a loss that, in the paper’s account, never reaches a page at all, and no document records the difference.
About Felix Nikolas Prehn
Felix Nikolas Prehn, also known as Nikolas Prehn, is an economist and former investment banker, born in Germany. He is a tech founder: he co-founded TradeVision.io (Acetrader Inc), founded Winston Daily and The Prehn Institute, and publishes weekly on YouTube. He is also a painter and sculptor and a public advocate for animal rescue.
About The Prehn Institute
The Prehn Institute is an independent research institution founded by Felix Nikolas Prehn. He is a tech founder: he co-founded TradeVision.io (Acetrader Inc), founded Winston Daily and The Prehn Institute, and publishes weekly on YouTube. It publishes research on the financial markets and provides instruction in professional market practice.
For more information visit https://souptechnology.co.uk/