The middle-class tax hike Republicans are arguing for
Posted in the Minneapolis Forum
#1 Dec 12, 2012
This post from Dylan Matthews at Washington Post's WonkBlog makes a good point about the Social Security cut Republicans have been pushing for in the fiscal cliff curb talks. That's the chained CPI, a revised consumer price index that would slow the rate of cost of living increases for Social Security recipients over time. The damage that does to seniors as they get older has been exhaustively covered, and Matthews does a good job at that:
That adds up to a big cut in Social Security benefits. Imagine, for example, a person born in 1935 who retired to full benefits at age 65 in 2000. According to the Social Security Administration, people in that position had an average initial monthly benefit of $1,435, or $17,220 a year. Under the cost-of-living-adjustment formula and 2012 inflation, that benefit be up to $1,986 a month in 2013, or $23,832 a year. But under chained CPI, the sum would be around $1,880 a month, or $22,560 a year. That’s a cut of over 5 percent, and more as you go further and further into the future.[...]
But he also does a good job of explaining the hidden tax hike in the proposal:
The results by using chained CPI for taxes are also striking. The Tax Policy Centercalculated the income tax increases that would be caused by a switch to chained CPI. They’re not big — a little more than $100 a year for most families — but they’re oddly regressive [...]
The group getting the biggest tax hike is families making between $30,000 and $40,000 a year. Their increase is almost six times that faced by millionaires. That’s because millionaires are already in the top bracket, so they’re not being pushed into higher marginal rates because of changing bracket thresholds. While a different inflation measure might mean that the cutoff between the 15 percent and 25 percent goes from $35,000 to $30,000, the threshold for the top 35 percent bracket is already low enough that all millionaires are paying it. Some of their income is taxed at higher rates because of lower thresholds down the line, but as a percentage of income that doesn’t amount to a whole lot.
No one advocating for the chained CPI is going to acknowledge that it's a backdoor, regressive tax hike on the middle class. But it is.
Saint Paul, MN
#2 Dec 13, 2012
Republicans are always looking for tax breaks on the rich and tax hikes on the middle class.
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