The U.S. government and many state governments have progressive income taxes. The word “progressive” does not mean “good”. This means that your marginal tax rate, which is your tax rate on excess income, increases as you move up the income ladder. When the rate was set for the United States, there was a link between gold and the dollar. The U.S. government’s promise to keep the price of gold at $ 35 per ounce limits the ability to print money and, thus, the ability to create inflation. But on August 15, 1971, President Nixon severed the last remaining connection between the dollar and gold. Until then, the U.S. government was ready to redeem সরকারের 35 per ounce for foreign government dollar gold. But on August 15, Nixon closed the “golden window.” This means that a residual legal restriction on the Federal Reserve’s ability to print money has passed. The result, not surprisingly, was a decade of high inflation. From 1971 to 1981, the average annual inflation rate was 8.4 percent.
This means that tax brackets designed for relatively high-income people were increasingly applicable to middle-income people, and tax brackets designed for middle-income people were increasingly applicable to low-income people. A table in 1982 Economic report of the President Tells stories. In 1970, a family of four whose income was half was in 15 percent tax bracket. By 1980, that family was in the 18 percent tax bracket. A four-person family with a mediocre income paid a marginal tax at 20 percent in 1970 and 24 percent in 1980. A four-person household with double the middle income paid a marginal tax of 26 percent in 1970 and 43 percent in 1980. And keep in mind that this is not just the family’s personal income tax rate and it doesn’t include Medicare (HI) or Social Security (FICA) taxes.
This is David R. “Take index state tax brackets,” comes from Henderson. Defined conceptMay 19, 2022.
Not surprisingly, Milton Friedman was ahead of the curve in favor of indexing tax brackets for inflation in 1974. And Ronald Reagan, after becoming president, wanted to do something about the problem. Although I’ve never seen it discussed, I can bet that Reagan regretted raising California’s top tax bracket soon after becoming governor in 1967. He faced a significant state budget deficit, but opted for a higher marginal tax rate. Income people deal with it. In 1966, for example, the California marginal tax rate on people with a taxable income of $ 30,000 or more was 7 percent. The income of $ 30,000 in 1966, adjusted for inflation, would be $ 268,694 today. In 1967, Reagan and the legislature increased the marginal tax rate to 9 percent for those earning $ 25,000 to $ 28,000 and 10 percent for those earning $ 28,000 or more. His tax rate remained the same, inflation stopped, and by 1980, middle-income Californians were paying the tax rate that Reagan, his advisers, and the California legislature wanted only for high-income Californians. As Shakespeare said, bad things make you sick and make you strong.
Reagan seems to have learned the lesson. Under the Economic Recovery Tax Act of 1981, he and Congress reduced the marginal tax rate on all annual income levels from 1982 to 1984 and listed tax brackets for inflation since 1985. The result is that inflation itself cannot keep you in high tax brackets. Good about. The level of income above which social security recipients pay taxes on their social security benefits, introduced in 1984, has never been adjusted for inflation. But those who do not get social security benefits cannot be kept in high tax brackets just by inflation.
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