There's no strict need to increase inflation, and the 1% is an "example amount" (e.g. means for example). Another possibility is simply to take inflation from an existing source. A third possibility is just to have it funded from donations. As a mentioned, this choice will be one of the most contentious decisions to be made, I think. I'm personally ok with many of the available options for the funding, although I think just using donations won't be sufficient.
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