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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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IRS Issues New Tax Rate Tables, Inflation Adjustments For 2018 The Tax Adviser
The Tax Adviser IRS issues new tax rate tables, inflation adjustments for 2018 The Tax Adviser In Rev. Proc. 2018 18, the IRS announced the new lower tax brackets for 2018 and a number of other new items affected by P.L. 115 97, known as the Tax Cuts and Jobs Act. It also issued inflation adjusted amounts for many provisions that were unchanged and more raquo

New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And...
Forbes New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More Forbes The Internal Revenue Service IRS has finally announced a number of tax related provisions for 2018, including, of course, the latest tax tables. These changes are due to the Tax Jobs and Cuts Act of 2017, signed into law by President Trump on IRS updates tax tables and inflation adjustments for new tax lawAccounting Today IRS Withholding Calculator Internal Revenue ServiceInternal Revenue Service 2017 Form W 4 Harvard Mathematics DepartmentHarvard Mathematics Department all 107 news articles raquo

State Individual Income Tax Rates And Brackets For 2018 Tax Foundation
The Register/Advertiser State Individual Income Tax Rates and Brackets for 2018 Tax Foundation Conversely, 33 states levy graduated rate income taxes, with the number of brackets varying widely by state. Hawaii now has 12 brackets, the most in the country. States39 approaches to income taxes vary in other details as well. Some states double their Taking the kick back out of soccerThe Register/Advertiser all 7 news articles raquo

Getting Real With Capital Gains Taxes By Adjusting For Inflation Tax Foundation
Tax Foundation Getting Real with Capital Gains Taxes by Adjusting for Inflation Tax Foundation Many elements of the income tax are adjusted for inflation, such as tax brackets, standard deductions, and income thresholds or dollar amounts of some tax credits. However, the purchase price of assets later sold for capital gains or losses is not

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Facts of Law about consumer inflation

Facts of Law - Inflation