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
• The Nearly Invisible Trump Tax Plan Proposal That Could Threaten Social Secur...
Yahoo News The Nearly Invisible Trump Tax Plan Proposal That Could Threaten Social Security Yahoo News Although this shift would have a direct impact on the way that tax brackets and deductions get indexed for inflation, use of the chained CPI in one government context might well lead lawmakers to apply it to other situations as well such as Social and more raquo
• Wolters Kluwer Predicts 2018 Inflationadjusted Tax Limits Accounting Today
Accounting Today Wolters Kluwer predicts 2018 inflation adjusted tax limits Accounting Today Wolters Kluwer Tax amp Accounting released its estimates Monday of tax bracket ranges and other inflation adjusted tax figures, including the standard deduction and personal exemption level, predicting the biggest tax savings in 11 years no matter what 2018 Tax Tables and Brackets: Deductions Go UpCPAPracticeAdvisor.com New Inflation Estimates from Wolters Kluwer Offer First Look at Impact for Taxpayers in 2018Business Wire press release all 3 news articles raquo
• New Report: GOP Tax Reform Could Boost Household Income By 4000 Daily Signal
Daily Signal New Report: GOP Tax Reform Could Boost Household Income by 4000 Daily Signal It calls for roughly doubling taxpayers39 standard deduction an individual39s first 12,000 of income would become tax free, as would the first 24,000 for married couples and for condensing the current seven tax brackets to three. Depending on their and more raquo
• AposHidden Tax Increaseapos Is Neither Hidden Nor An Increase The Hill
The Hill 39Hidden tax increase39 is neither hidden nor an increase The Hill Congress therefore indexed income tax brackets to CPI. However, this was an imperfect measure of the effects of inflation. When a good39s price increases, consumers are not forced to continue purchasing that good they often instead substitute that
• Middleincome Earners Probably Wonapost Be Paying As Much Tax As The Governmen...
The Conversation AU blog Middle income earners probably won39t be paying as much tax as the government expects The Conversation AU blog The PBO modelling shows that people in the middle of the income spectrum will bear the brunt of this, due to bracket creep. This occurs when tax thresholds including the tax free threshold stay constant while income grows due to inflation. But the
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