On Tue, 7 May 1996, Timothy C. May wrote:
At 8:46 PM 5/7/96, Black Unicorn wrote:
I'm not sure I understand what you mean. I sent the text of the law to the list. The position that you take (that increse in inflation can send you into the next tax bracket) is incorrect.
I wrote my comment before I saw your message. Does this make it clearer?
It does. My apologies.
I agree that the fewer brackets have lessened the problem in the last couple of years, but, then, inflation has not been an issue in the last couple of years. (I seem to recall an explicit statement that the brackets would not be adjusted upward, as the bill called for, because the inflation rate had been below the threshold....).
Any increse less than $50 in the bracket rates is rounded down to the next multiple of $50 under Section 1(f)(6)(A). I do also recall a threshold statement of some sort, but I always thought it refered to the $50 rounding exception.
In any case, my larger point has been about the effect over the last decade or so, where significant numbers of people are now up at the 40-45% marginal tax rate (Federal plus state, in many states).
Agreed. And many states do not adjust taxation brackets for inflation.
...
Rates will not change with respect to inflation (to the extent that inflation is accurately measured by the CPI).
I believe an exception was made for the top bracket in 1994, but I don't recall how it was implemented.
The top marginal rate was increased. As I recall, from around 38% to around 42%.
My 1994-1995 code indicates 39.6% for single heads of households with incomes over $250,000. (Pay $77,299, plus 39.6% of the excess over $250,000). That was for the 1994 tax year. If there was an explicit raise, I haven't heard (though this isn't too surprising, I haven't paid much attention to domestic U.S. tax rates lately). There is a phaseout of personal exemptions and deductions for the highest bracket which can effectively bring the tax rate above 40%. Is this what you mean? (Or have I been sleeping through the tax legislation process?)
(As the money runs out, as the so-called trust funds turn out to be empty, as "entitlements" expand, and as more and more people are too poorly-educated and -motivated to succeed in high-paying jobs, I expect the top marginal rate to continue to be ratcheted upward. Until other forces come into play, of course.)
Agreed. As per other forces, I can't see any given the Forbes fall and the lack of interest in a flat reform measure. I do, however, predict that compliance will begin to fall much more dramatically following any explicit raise above 40%.
--Tim May
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