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Bracket Creep
Bracket creep is usually defined as the process by which inflation pushes wages and salaries into higher tax brackets, leading to fiscal drag. However, even if there is only one tax bracket, or one remains within the same tax bracket, there will still be bracket creep resulting in a higher proportion of income being paid in tax. That is, although the marginal tax rate remains unchanged with inflation, the average tax rate will increase. Most progressive tax systems are not adjusted for inflation. As wages and salaries rise in nominal terms under the influence of inflation they become more highly taxed, even though in real terms the value of the wages and salaries has not increased at all. The net effect is that in real terms taxes rise unless the tax rates or brackets are adjusted to compensate. Examples Suppose a person earns $20,000 per year and is liable to 20% tax on earnings above a threshold of $5,000 per year. Then they pay ($20,000–$5,000)*0.2 = $3,000 in taxes, or 1 ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inflation
In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of CPI inflation is deflation, a decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index. Changes in inflation are widely attributed to fluctuations in Real versus nominal value (economics), real demand for goods and services (also known as demand shocks, including changes in fiscal policy, fiscal or monetary policy), changes in available supplies such as during energy crisis, energy crises (also known as supply shocks), or changes in inflation expectations, which may be self-fulfilling. Moderat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Tax Bracket
Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, though that is rarer). Essentially, tax brackets are the cutoff values for taxable income—income past a certain point is taxed at a higher rate. Example Imagine that there are three tax brackets: 10%, 20%, and 30%. The 10% rate applies to income from $1 to $10,000; the 20% rate applies to income from $10,001 to $20,000; and the 30% rate applies to all income above $20,000. Under this system, someone earning $10,000 is taxed at 10%, paying a total of $1,000. Someone earning $5,000 pays $500, and so on. Meanwhile, someone who earns $25,000 faces a more complicated calculation. The rate on the first $10,000 is 10%, from $10,001 to $20,000 is 20%, and above that is 30%. Thus, they pay $1,000 for the first $10,000 of income (10%), $2,000 for the second $10,000 of income (20%), and $1,500 for the last $5,000 of income (30%), In total, they pay $4,500, or ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fiscal Drag
Fiscal drag happens when the government's net fiscal position (spending minus taxation) fails to cover the net savings desires of the private economy, also called the private economy's spending gap (earnings minus spending and private investment). The resulting lack of aggregate demand leads to deflationary pressure, or drag, on the economy, essentially due to lack of state spending or to excess taxation. One cause of fiscal drag may be bracket creep, where progressive taxation increases automatically as taxpayers move into higher tax brackets due to inflation. This tends to moderate inflation, and can be characterized as an automatic stabilizer to the economy. Fiscal drag can also be a result of a hawkish stance towards government finances. Real fiscal drag Real fiscal drag takes place when tax thresholds are increased in line with price rises to avoid ''nominal fiscal drag'', but where a growing economy means that earnings rise faster still, so increasing taxes as proportion o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Progressive Tax
A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term ''progressive'' refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate. The term can be applied to individual taxes or to a tax system as a whole. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with a lower wikt:ability to pay, ability to pay, as such taxes shift the incidence increasingly to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive tax, such as a sales tax, where the poor pay a larger proportion of their income compared to the rich (for example, spending on groceries and food staples varies little against income, so poor pay similar to rich even while latter has much higher income). The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percen ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Government
A government is the system or group of people governing an organized community, generally a State (polity), state. In the case of its broad associative definition, government normally consists of legislature, executive (government), executive, and judiciary. Government is a means by which organizational policies are enforced, as well as a mechanism for determining policy. In many countries, the government has a kind of constitution, a statement of its governing principles and philosophy. While all types of organizations have governance, the term ''government'' is often used more specifically to refer to the approximately 200 list of sovereign states, independent national governments and government agency, subsidiary organizations. The main types of modern political systems recognized are democracy, democracies, totalitarian regimes, and, sitting between these two, authoritarianism, authoritarian regimes with a variety of hybrid regimes. Modern classification systems also ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Real Income
Real income is the income of individuals or nations after adjusting for inflation. It is calculated by dividing nominal income by the price level. Real variables such as real income and real GDP are variables that are measured in physical units, while nominal variables such as nominal income and nominal GDP are measured in monetary units. Therefore, real income is a more useful indicator of well-being since it measures the amount of goods and services that can be purchased with the income. Growth of real income is related to real gross national income per capita growth. According to the classical dichotomy theory, real variables and nominal variables are separate in the long run, so they are not influenced by each other. In other words, if the nominal starting income was 100 and there was 10% inflation (general rise in prices, for example, what cost 10 now costs 11), then with nominal income of still 100, one can buy roughly 9% less; so if nominal income was not a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Tax Foundation
The Tax Foundation is an international research think tank based in Washington, D.C. that collects data and publishes research studies on Taxation in the United States, U.S. tax policies at both the federal and state levels. Its stated mission is to "improve lives through tax policy research and education that leads to greater economic growth and opportunity". The Tax Foundation is organized as a 501(c)(3) Tax exemption, tax-exempt Non-profit organization, non-profit educational and research organization, with three primary areas of research: the Center for Federal Tax Policy, the Center for State Tax Policy, and the Center for Global Tax Policy. The group is known for its annual reports such as the ''State Tax Competitiveness Index'', ''International Tax Competitiveness Index'', and ''Facts & Figures: How Does Your State Compare'', which was first produced in 1941. History The Tax Foundation was organized on December 5, 1937, in New York City by Alfred P. Sloan Jr., Chai ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Price Index
A price index (''plural'': "price indices" or "price indexes") is a normalized average (typically a weighted average) of price relatives for a given class of goods or services in a specific region over a defined time period. It is a statistic designed to measure how these price relatives, as a whole, differ between time periods or geographical locations, often expressed relative to a base period set at 100. Price indices serve multiple purposes. Broad indices, like the Consumer price index, reflect the economy’s general price level or cost of living, while narrower ones, such as the Producer price index, assist producers with pricing and business planning. They can also guide investment decisions by tracking price trends. Types of price indices Some widely recognized price indices include: * Consumer price index – Measures retail price changes for consumer goods and services. * Producer price index – Tracks wholesale price changes for producers. * Wholesal ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inflation Reduction Act Of 2022
The Inflation Reduction Act of 2022 (IRA) is a United States federal law which aims to reduce the federal government budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy. It was passed by the 117th United States Congress and signed into law by President Joe Biden on August 16, 2022. It is a budget reconciliation bill sponsored by Senators Chuck Schumer ( D- NY) and Joe Manchin (D- WV). The bill was the result of negotiations on the proposed Build Back Better Act, which was reduced and comprehensively reworked from its initial proposal after being opposed by Manchin. It was introduced as an amendment to the Build Back Better Act and the legislative text was substituted. All Democrats in the Senate and House voted for the bill while all voting Republicans voted against it. It was described as a landmark piece of legislation. According to the nonpartisan Congressional Budget Office (CBO) and Joint Committee on Ta ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Money Creation
Money creation, or money issuance, is the process by which the money supply of a country, or an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is a liability, typically called reserve deposits, and is only available for use by central bank account holders, which are generally large commercial banks and foreign central banks. Central banks can increase the quantity of reserve deposits directly, by making loans to account holders, purchasing assets from account holders, or by recording an asset, such as a deferred asset, and directly increasing liabilities. However, the majority of the money supply used by the public for conducting transactions is created by the commercial banking system in the form of commercial bank deposits. Bank loans issued by commercial banks expand the quantity of bank deposits. Money creation occurs when the am ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fiscal Drag
Fiscal drag happens when the government's net fiscal position (spending minus taxation) fails to cover the net savings desires of the private economy, also called the private economy's spending gap (earnings minus spending and private investment). The resulting lack of aggregate demand leads to deflationary pressure, or drag, on the economy, essentially due to lack of state spending or to excess taxation. One cause of fiscal drag may be bracket creep, where progressive taxation increases automatically as taxpayers move into higher tax brackets due to inflation. This tends to moderate inflation, and can be characterized as an automatic stabilizer to the economy. Fiscal drag can also be a result of a hawkish stance towards government finances. Real fiscal drag Real fiscal drag takes place when tax thresholds are increased in line with price rises to avoid ''nominal fiscal drag'', but where a growing economy means that earnings rise faster still, so increasing taxes as proportion o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
