Hidden Tax Hike in GOP Plan?

The Republican tax framework released yesterday wasgenerally excellent. However, it appears to include a sneaky and invisible tax hike. The framework “envisions the use of a more accurate measure of inflation for purposes of indexing the tax brackets and other tax parameters.”The individual income tax is indexed for inflation, meaning that the dollar split points between the rate brackets and other parameters are set to rise a bit each year. Without those adjustments, Americans would lose ground to the government over time, as more of their income would be taxed at higher rates due to the general rise in prices.Current indexing is based on the Consumer Price Index  (CPI). The CPI overstates inflation somewhat, so some analysts have suggested switching tax-code indexing to chained CPI, which produces a lower inflation measure.If Republicans indexed the tax code to chained CPI, the government would receive an automatic tax increase relative to current law every year until the end of time. The Tax Foundation has a brief on the issuehere.Switching tax-code indexing to a lower measure of inflation is a bad idea for two reasons:It would generate a substantial tax increase over time, and it would be an invisible increase because there would be no tax-filing changes  for people to notice.It would be an anti-growth tax increase because it would push people into higher brackets more quickly over time, subjecting them to higher marginal tax rates. The chained CPI proposal is esse...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs