For obvious reasons, Congress does not want people to know about the Creeping Tax Increases for 2020.
Millions of Americans are paying more to Uncle Sam because there’s no indexing for a variety of tax provisions, including homeowner benefits, tax thresholds on Social Security and investment benchmarks among others. The 2017 tax overhaul added more to this list.
The lack of an inflation adjustment is often intentional, says Len Burman, a tax economist who is a professor at Syracuse University and co-founder of the Tax Policy Center.
- Home Ownership: Once, home buyers could deduct the interest on any amount of mortgage debt. In 1987, Congress limited this break to deductions on up to $1 million of debt used to buy up to two homes, unindexed for inflation. If this limit had been adjusted, it would have been more than $2 million by 2017’s tax overhaul.
- In 2017 Instead of adjusting the home ownership limit upward, the overhaul pared it to $750,000, again unindexed for inflation.
- State and Local Tax Writeoffs: Lawmakers capped write-offs for state and local property and income or sales taxes, or SALT, at $10,000 per return, with no inflation adjustment.
- Profit on a Sale of a Home: A popular exemption of up to $500,000 per married couple of profit on the sale of a house ($250,000 for single filers) enacted in 1997 also isn’t adjusted for inflation.
- Social Security: The income thresholds for including Social Security payments in taxable income haven’t changed since they were enacted in the ‘80s and ‘90s. The income thresholds requiring filers to report 85% of payments on their tax return have been $44,000 for married couples and $34,000 for singles since 1994. They would be about $77,000 for couples and $60,000 for singles in 2020.
- Capital Losses: Since 1978, the tax code has allowed investors to deduct only $3,000 of net long-term investment losses against ordinary income like wages. Adjusted for inflation, that deduction would be more than $12,000.
- Marriage Penalty: The $3,000 deduction applies to both single and married filers. To fix that, the threshold should arguably be $12,000 for individuals and $24,000 for married filers.
Who Benefits From Inflation?
In case you were wondering who benefits from inflation, here’s the answer once again:
The asset holders, those with first access to money, and governments.
Mike “Mish” Shedlock
The government obfuscated an excise tax so they could implement it as a direct tax on individuals. They did this by redefining common terms. If you look up the definition of ’employee’, it is someone who works for the government or is a CEO. A ‘trade or business’ is defined as a public office and the definition also states ‘personal payments do not apply’. Folks who do not work in the public sector should be receiving 1099-misc rather than a w-2 which is intended for public jobs. Look it up, it’s in the statutes. Show the statutes to your company and demand they issue a 1099 rather than w-2. A w-2 implies you have received a privilege and are subject to the excise.
Nixon’s “temporarily” unhooking politicians from the gold standard in 1971 set the stage for this now-permanent regime of taxation by inflation.
I remember being awed by the US GDP reaching one trillion dollars during Nixon’s first term. Both parties just agreed on a Federal budget to spend over four trillion next year. Government is apparently thriving, however I’ve noticed far more homeless on the streets of southern California than when I first moved here in 1967, but they have nicer tents. Maybe that and a cell phone is all it takes to keep them from rioting today.
Boiling frogs comes to mind…ribbit, ribbit.
The amount of your standard deduction depends on the filing status you qualify for. In 2019, single taxpayers and married taxpayers who file separate returns can claim a $12,200 standard deduction. Married couples filing jointly can claim an amount that’s twice as large, $24,400. https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/what-are-standard-tax-deductions/L7oiVM1DH
Prices costs soaring,deficits ripping higher,inflation rate of 15% (at least),just to maintain current spending factoring a steady 2 trillion dollar “official”annual deficit just to keep up with inflation taxes,borrowing (printing)will have to rise at 300-400 billion dollars YOY on top of the “official”2 trillion plus deficit…..and that’s just barely pay the interest on the soaring dept.Repeat after me …….BANKRUPT BANANA REPUBLIC!
You are correct. Time to balance the budget once and for all.
Mish, as a 100% disabled veteran that has to live on one payday per month indexed to the (ROTFLMAO) CPI, I can tell you right now that the prices of things as measured by the BLS have zero in common with what we pay for them. Trust me, my VA disability just rose from $3,057 per month to $3,106 per month. My rent was $725 in 2013 and is $1,250 now and I shudder to see what the increase will be when the lease is up at the end of January. I have lost 40% of my purchasing power (AT LEAST) since the 2013/14 lease period. We can argue about whether or not that is hyperinflation, but it is enough to know that the CPI is utterly bogus and anyone who says it is anything under 8% is just flat out full of shit and I will say it to their face.
Great post.
Inflation is always understated by the government Because the traditional way to fight inflation is to raise interest rates. Remember Paul Volcker? Well you raise interest rates and many bad things happen such as the economy dies and interest rates on government debt, corporate debt, etc rise to the point it overwhelms the economy, the economy crashes and you end up with a Hitler type running the government. And now you know the rest of the story.
Well now work theproblem this way take the year you started collecting your check and look up the cpi for all of the years to present. Then work the problem by looking up the value of the dollar then when you started collect your check and the value of the dollar then in todays dollars and I used all government figures off of their web sites and the results was terrible.
The governments politicians dirty little secret or is it the donors to the politicians. The people with money make the contribution and then write the laws to their benefit and they are all owners of the federal reserve – the extreme wealthy. The ones that attend the Bilderburg society meetings.
I’m gonna have to get off my fat arse and start condensing my notes because I’m past due on writing a book… “The Practical Guide to Tax Evasion”.
Will the subtitle be, “How to Barter Your Way to Wealth.” ?
1913 = Enactment of the Federal Reserve System; 1913 = Federal Income Tax ratified and enacted by Congress. Why the income tax? To make us serfs pay the interest on the money borrowed from the Fed, of course.
Federal income tax isn’t going away, until the Fed goes away.
Well who owns the Federal Reserve? I know i sure don’t.
It is amazing and puzzling to me that people complain incessantly about tweaks to the tax code, or a 10% rise in gasoline prices, or sales taxes on specific products, but we accept the Federal Income Tax on our JOBS. A tax on jobs kills jobs. The real goal should be to eliminate this oppressive tax.
To recover our freedom and prosperity, we must delete line #1 from the Federal Income Tax Form 1040. Why argue about how to teak this tax into fairness. Get rid of it. When we rebelled against the British Stamp tax, it was nowhere near as oppressive as the Federal Income Tax, which was shoved down our throats to fund WWI, right after the creation of the Federal Reserve, which was also created to fund WWI.
The Federal Income Tax rates were later raised and applied to wages salaries, and tips, with employer withholding, to fund WWII.
If you want to stop the wars, recover your economic prosperity, and regain your personal freedom, then end the war tax. Now! Delete line #1 on the 1040 form.
Ending income tax wouldn’t stop wars or promote economic prosperity in this era of money printing. The Forever Wars and other MIC misadventures are funded by deficit spending, not tax dollars.
The current system has to collapse before any real change can occur. After that we can all debate the merits of taxation, provided we can dig ourselves out of the rubble first.
I hate to tell you this but a major reason we have wars and is to give people jobs as well as make business for many industries. World War Two is what got the American economy out of the great depression. This is simply a fact. It is also called government stimulus.