Editing 79-11-A2 (section)

= Income Tax Indexation =

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=== Transcript ===
You've probably heard many politicians tell you over the years that inflation is the
cruelest tax of all. That it spares no one. That it undermines the economy and the
strength of the dollar overseas. They're right, of course. But what they might not have
told you is that there is one beneficiary of inflation--government. In an inflationary
year, the wages of many Americans are pushed up to compensate for that inflation with
cost-of-living increases. Unfortunately, this raise often pushes the taxpayer into a
higher tax bracket too. Since our income tax is graduated, this hapless worker will not
only pay more dollars of tax, but a higher percentage of his income. Thus, you can see
how Congress, simply by doing nothing in an inflationary year, can raise taxes without
voting for an increase. Then as election time rolls around, it can vote a modest tax
cut without putting much of a dent in its spending habits.

Well, the tax and economic experts have realized that the American taxpayer has been
saddled with this hidden tax for years, and many have proposed a solution that has
caught the eye of opponents of Big Government. It's called indexation. In a recent
article, Joseph Minarik, a Brookings Institute economist, explains how it would work.

"The average wage-earner can be protected by a very simple kind of indexing--
increasing the standard deduction and the personal exemption at the same rate as the
price level. This would prevent taxable income from increasing if wages merely kept
up with inflation."

Supporters of indexing say that since inflation has apparently become a long-term
feature of our economy, we need this kind of system built into our t ax laws to protect
the cost-of-living wage increases of workers and to prevent the federal government
from getting rich off the very economic ills it helps to create. Opponents of indexing
include Big Government advocates who welcome the extra revenue inflation generates for
the government. They see this hidden tax, because it is indirect, as a relatively
painless way to increase the government's share of the national wealth without actually
having to vote new taxes.

Since it appears that inflation will be around for awhile, indexing could provide
needed relief for overtaxed American workers. However, it is not a step that should
be taken lightly. Devising a system of indexing could produce new complications in
our tax laws. That's something we sure don't need. And what about other forms of
income such as capital gains and interest? Many would argue that a fair system of
indexing would have to include inflation adjustments for these, too.

Finally, some observers feel that adopting indexation would be a tacit admission that
we have given up on our efforts to fight inflation. If we eliminate the pain inflation
causes, will we become more complacent about finding ways to put the brakes on an
overheated economy?

These are some of the concerns voiced about indexing. But with inflation running
at a double-digit pace and a greater awareness among taxpayers of the federal government's
taxing schemes, indexing is an idea you are going to hear a lot more of in the coming
months. 

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=== Details ===
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<TR><TD WIDTH="150">Batch Number</TD><TD WIDTH="150">{{PAGENAME}}</TD></TR>
<TD>Production Date</TD><TD>07/27/[[Radio1979|1979]]</TD></TR>
<TD>Book/Page</TD><TD>[[rrpl:public/2024-07/40-656-7386263-014-016-2024.pdf#PAGE=20|Online PDF]]</TD></TR>
<TD>Audio</TD><TD></TD></TR>
<TD>Youtube?</TD><TD>No</TD></TR>
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===Added Notes===

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