Silent Tax Changes: The Political Economy of Indexing for Inflation
36 Pages Posted: 23 Sep 2015
Date Written: September 21, 2015
Abstract
The federal income tax adjusts many but not all of its dollar components automatically to account for inflation. In this article I analyze the benefits and burdens this process confers on some taxpayers and the political logic behind them. I discuss the choice of the proper index for making the adjustments, as well as the effects of the failure to adjust specific dollar amounts. I conclude that some adjustments have become overly generous, while unadjusted provisions suffer slow repeal, sometimes intentionally. Indexation thus can have the effect of tax legislation by stealth.
Keywords: inflation, indexation, income taxation, political economy, consumer price index, social security, child care, standard deduction
JEL Classification: K34, H20, E62
Suggested Citation: Suggested Citation