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Facts - Books - News    U.S. Facts Of Law:


Inflation And Income Tax Bracket

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 through inflation.

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.

 

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Inflation And Tax Bracket News
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Letter To The Editor York NewsTimes
Letter to the Editor York News Times Numbers are wonderful and great to use however, when you skew them to reflect an untruth you must be held accountable. When you first wrote about the city workers, you used language of how hard working they are and what they have done for the great

1 Critical Mistake To Avoid When You Retire Kiplinger Personal Finance
Kiplinger Personal Finance 1 Critical Mistake to Avoid When You Retire Kiplinger Personal Finance It39s easy to select your target retirement date or to budget what you39ll need for monthly income, but projecting portfolio returns, life expectancy, taxes, inflation and health care needs amounts to strategic guesswork. These assumptions are risky and more raquo

AposSenior Inflationapos: NotSoSilent Retirement Killer Kiplinger Kiplinger...
Kiplinger Personal Finance 39Senior Inflation39: Not So Silent Retirement Killer Kiplinger Kiplinger Personal Finance Health care costs are a huge part of retirees39 financial picture, and they keep jumping at a rate faster than other prices overall. Here are some strategies to cope. and more raquo

Tax Reform Will Help Determine Which Americans Are Considered Rich CNBC
CNBC Tax reform will help determine which Americans are considered rich CNBC Before lawmakers can decide how much to tax the rich, they have to figure out who falls into that category. and more raquo

Sask. Tax Changes Hurting Women, Poor: CUPE Yahoo News Canada Blog
Yahoo News Canada blog Sask. tax changes hurting women, poor: CUPE Yahoo News Canada blog As of 2018, tax brackets will no longer be indexed to inflation. It means relatively minor cost of living increases could bump some marginal income into a higher tax bracket. Sales tax hikes have been offset somewhat by lower income tax rates. For

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Facts of Law about consumer inflation

Facts of Law - Inflation