Switch To Chained CPI In Individual Tax Would Raise 59.6 Billion

WASHINGTON -- Middle and low-income taxpayers would be the hardest hit if a measure of inflation tied to the individual tax code were changed, according to a new analysis from the Joint Committee on Taxation.

A proposal being discussed in lawmakers' negotiations to switch a common measure of inflation tied to the income tax to the "chained CPI" would get more than two-thirds of its revenue gains in 2021 from taxpayers making less than $ 100,000, according to estimates from the nonpartisan Congressional research office released in a memorandum Wednesday.

In total, between 2012 and 2021, switching to the alternate measure would raise $59.6 billion in revenues, according to JCT's estimate. But the revenues would increasingly come from lower-income taxpayers. By 2021, 69% of the additional revenue in federal taxes would come from people making less than $ 100,000.

"A change to a chained CPI would place new burdens mainly on the backs of seniors, middle income and low income Americans," said Rep. Sander Levin (D., Mich.), the top Democrat on the Ways and Means Committee.

The proposal under discussion would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.

Such a move is widely seen by economists as resulting in a slower rise in inflation. That would affect income tax brackets set by the federal government. If a person's income remained stagnant but the thresholds for tax brackets grew more slowly, people would be more likely to find themselves paying more taxes in a higher tax bracket.

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