8 unexpected ways inflation can lead to higher taxes

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Inflation has been the big economic story of 2022. Step increases in consumer prices have hurt families in many ways—some of which aren’t so obvious.

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You’re likely aware of the hefty increases in borrowing costs, home pricesrents, gas prices and grocery. But here’s something else to consider: how inflation can lead to higher taxes.

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Important parts of the federal tax code aren’t indexed for inflation. Result: If inflation leads to nominal increases in a family’s income, it could lead to larger tax bills at a time when many taxpayers are already contending with steeply higher consumer prices. That would be an ill-timed double whammy for many Americans. Consider eight examples:

What can be done? John Goodman and Boston University professor Laurence Kotlikoff recently proposed several measures to reduce the tax bite caused by inflation. For instance, they recommended fully indexing the federal tax code for inflation and doing the same for the threshold at which Social Security benefits are taxed. They also proposed eliminating the payroll tax for anyone over Social Security’s full retirement age.

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This column first appeared on Humble Dollar, It has been republished with permission.
Richard Connor is a semiretired aerospace engineer with an interest in finance and a contributor to Humble Dollar. Follow Rick on Twitter @RConnor609 and check out his earlier articles,

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Credit: www.marketwatch.com /

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