There’s an Increase Hiding in the Republican Tax Cuts
Changing how inflation is measured could cut increases in future Social Security benefits and push people into higher tax brackets
Bloomberg, November 30, 2017
There’s an argument in policy circles that goes something like this: If only we could lower inflation as reported in the consumer price index, we could afford more tax cuts.
You are going to be hearing a lot about his concept in the coming weeks if the Republican tax bill becomes law.
Over the years, I have argued that official government inflation models like the CPI tend to underreport price increases.
What does this have to do with the proposed Republican tax plan? The new tax proposal would replace the current CPI, which is based on changes in wages for urban and clerical workers, with a new version called the chained consumer price index. Various estimates conclude this new measure would lower reported inflation, which is already lower than it actually is, by as much as 0.30 percent a year. 1
But this yardstick would do something else: It would allow Congress to come up with about half of the funds needed to cover the proposed GOP tax cuts by pushing more people into higher tax brackets and potentially creating a hidden tax on everyone who will ever get Social Security in the future . .
Continues at: There’s an Increase Hiding in the Republican Tax Cuts