The CPI And Tax Brackets

The debate over adjusting the consumer price index to more faithfully reflect price movements in the economy would have to include the impact of changes on tax brackets, according to economists. A lower CPI number would mean higher taxes for many.

• A drop of one percentage point in the CPI would raise taxes $48 billion over five years.

• This compares to a $51 billion cut in Social Security payouts, according to Congressional Budget Office estimates.

But some contend that it would not bring in that much, since people being pushed into higher tax brackets start hiring tax consultants to find tax breaks.

Those opposed to allowing CPI revisions to influence tax brackets call the move a "stealth tax hike," and demand that any such hike be accomplished in public view and accorded full debate.

Source: Editorial, "Robbing Peter to Pay Social Security," Investor's Business Daily, December 16, 1996.