A certain amount of inflation is a necessity in a
capitalistic economy. The upside of a small
amount of inflation is that it reduces the real
amount of debt one owes, causes some investments
such as real estate to increase in value and makes
workers feel better because it helps their wages to
increase over time. The downside of inflation
is that it can devastate the real value of savings
and the real amount of income of those on fixed
incomes such as retirees.
Another downside of inflation is that it causes
wage earners incomes to creep into higher tax
brackets. Income tax rates are generally
structured so that the more one makes the higher the
tax bracket. However, tax brackets are not
adjusted for inflation and this causes wage earners
more in taxes over time.
As an example, a worker making, say, $50.000 per
year may find himself in a 20% tax bracket. In
several years, inflation may have increased the
worker's cost of living by 20% or more, so he needs to
be making $60,000 just to stay even. The way
Congress structures income tax brackets, they don't
change over time for inflation. So, the worker,
by earning $10,000 more per year, may now be in the
25% tax bracket, yet his wages buys him no more than
it did when he was making $50,000. In effect,
the government has increased the workers taxes just
Congress knows inflation will push people into
higher tax brackets over time and will cause increased
tax rates on the median income. That's one
reason they like the the Federal Reserve to allow some
inflation to exist in the economy and only reign in
growth in the face of hyper inflation.
Inflation And Tax Bracket News
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• Chained CPI Hits Social Security Through Taxation Of Benefits FedSmith.com
FedSmith.com Chained CPI Hits Social Security Through Taxation of Benefits FedSmith.com Every year, the IRS adjusts the mechanics of the tax code to prevent people from rising into higher tax brackets as a result of inflation rather than an increase in actual income. The tax reform package passed last year slows these adjustments for and more raquo
• The Turnbull Government Says Its Tax Plan Deals With Bracket Creep. Does It ...
The Guardian The Turnbull government says its tax plan deals with bracket creep. Does it The Guardian You may notice bracket creep when your salary happens to rise so much that the pointy end of your income pushes into a higher tax bracket thanks to a promotion or a better paying job, but it also occurs when you receive a small pay increase that
• Hawke And Keating, Secret Neoliberals The Australian Financial Review
The Australian Financial Review Hawke and Keating, secret neo liberals The Australian Financial Review While analyses of inflation and bracket creep might lead their authors to conclude the Turnbull government39s income tax cuts are fair, they will struggle as long as public perceptions of big business and the top echelons of society remain so jaundiced.
• Is The New Tax Law A Good Or Bad Thing Military.com
Military.com Is the New Tax Law a Good or Bad Thing Military.com New inflation measurement. The new chained measure of inflation used under the new law will result in slower growth of income levels within the tax brackets. Over time, this will mean you39ll pay more taxes than you would have under the old inflation
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