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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
GN News
• Retireesapos Financial Mistakes Philadelphia Inquirer
Retirees39 financial mistakesPhiladelphia InquirerPaying too much in taxes. Retirees usually are in lower tax brackets than when they worked. But they often fail to adjust accordingly. Putting off taking withdrawals from an individual retirement account until they are required at age 701/2 also can be Groundhog Day: 7 mistakes retirees make repeatedlyThe News Journal6 mistakes retirees makeVentura County Starall 8 news articles raquo
• The Fedaposs New Tax On Retirees Forbes
BloombergThe Fed39s New Tax on RetireesForbesInflation is a tax, even if the inflation rate is low. The Federal Reserve Board Members and Federal Reserve Bank Presidents are projecting long run inflation to be 2.0 percent, although this year the rise is expected to be slightly lower.Regional Fed Presidents Disclose HoldingsCNBC.comWhy Different Stocks Are Needed For The Next 3 Years Of Low Interest RatesSeeking Alphaall 428 news articles raquo
• Fed Dangles Carrot Over Stocks STLtoday.com
Fed dangles carrot over stocksSTLtoday.comThe latest nudge came last month when the Fed said it doesn39t expect to raise its benchmark rate until late 2014, at the earliest. Rates have been near zero since December 2008. The latest extension means borrowers can expect another three years of and more raquo
• Why The GOP Should Stop Invoking Reaganomics Washington Post
Why the GOP should stop invoking ReaganomicsWashington PostThough when the Reagan tax cut was enacted in 1981, the bottom rate was reduced to 11 percent. While our aim was to increase growth and employment, we were intent on doing so in a way that did not exacerbate inflation, which was the nation39s top and more raquo
• Romneyaposs Income Tax Rate Should Be Zero Forbes
ForbesRomney39s Income Tax Rate Should Be ZeroForbesPresident Obama, Democrats and the media are trying to turn Republican presidential candidate Mitt Romney39s 15 percent tax bracket into a scandal: They complain he doesn39t pay enough. But the real scandal is that Romney had to pay anything.Romney 39Not Concerned About the Very Poor39The Nation. blogall 1,845 news articles raquo
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