Eliminate indexing tax rates to inflation

PARTY LIKE IT’S 1979: How Democrats can raise taxes without technically raising taxes.

Short version: Eliminate indexing tax rates to inflation.

The argument in favor of indexing is that it eliminates “bracket creep.” That’s when more of a taxpayers’ income gets pushed into a higher bracket each year simply due to inflation, and not because of any underlying real increase in the money they take home.

Plenty of economists and experts argue bracket creep damages the economy: By shoving people into higher tax rates, even though their pay hasn’t increased, bracket creep discourages economic activity and slows down growth. Furthermore, America endured a brutal run of inflation during the 1970s. By 1980, the annual rate of price increase had briefly topped 13 percent, according to the traditional measure of inflation. As you can imagine, lots of people were attracted to the idea of neutralizing bracket creep.

Here’s the problem with that logic: If your economy is experiencing high inflation, like what we went through under Carter, then it needs to slow down.

Somebody needs to explain stagflation — what was actually going on in 1980 — to this dunce.

 

 

h/t SG

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