Thursday, November 12, 2009

Bracket Creep Returns

Courtesy, of course, of the working man's friend, the Party of Compassion. As this article points out, government experienced a massive windfall due to inflation pushing people into higher tax brackets over decades (ended under Reagan with indexing for inflation), even though in inflation adjusted dollars their incomes did not actually increase. Now wicked witch Pelosi and her evil minions want to bring this kind of thievery back, by sneaking it into their phony health reform bill. But what else would you expect from a gang of thieves like Congress?

All of those twentysomethings who voted for Barack Obama last year are about to experience the change they haven't been waiting for: the return of income tax bracket creep. Buried in Nancy Pelosi's health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as their earnings rise over a lifetime these youngsters can look forward to paying higher rates even if their income gains aren't real.

In order to raise enough money to make their plan look like it won't add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not offering health insurance.

The Return of the Inflation Tax

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