The under-30 crowd that clamored for Barack Obama last year needs to brace for a change they won’t believe in: The return of income tax “bracket creep,” according to The Wall Street Journal’s editorial page.
“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,” the editors write.
This is budget trickery at its worst: To raise money to make their plan appear as if it won't add to the federal deficit, House Democrats have intentionally not indexed the main tax feature of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge, and the tax on small businesses which don’t provide health insurance benefits.
“This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases,” write the editors.
The effects of failing to index compounds, generating a revenue windfall for government as time passes.
“Americans of a certain age have seen this movie before. In 1960, only 3 percent of tax filers paid a 30 percent or higher marginal tax rate. By 1980, after the inflation of the 1970s, the share was closer to 33 percent,” the editors write.
“These stealth tax increases were widely seen to be unjust. And in 1981 as part of the Reagan tax cuts, a bipartisan coalition voted to index the tax brackets for inflation.”
Overseas, the center-right coalition of German Chancellor Angela Merkel is taking the lessons of Reagan approach to economic stimulus, ending Germany’s “bracket creep,” as a way to boost the recovery there, reports Zeit Online.
© 2013 Newsmax. All rights reserved.