You're joking, right? 2 taxpayers, taxpayer 1 makes $50,000, taxpayer 2 makes $100,000. One bracket, 20% and no deductions or exemption. Year one, tax revenue $30,000.
Year 2, 6% inflation, incomes rise 6%. Incomes now $53,000 and $106,000. Tax revenue $31,800. Real tax revenue $30,000. No change.
Same scenario, now with 3 tax brackets. $0-$40,000 15%, $40,001-$90,000 20%, $90,001-$150,000 30%. Revenue year one, taxpayer 1 pays $8,000. Taxpayer 2 pays $19,000. Year 2, 6% inflation, incomes rise 6%. Taxpayer 1, income $53,000, pays $8,600, real tax $8,113. Taxpayer 2, income $106,000, pays $20,800, real tax $19,623.
The government gets 2.7% more revenue. Taxpayer 1 pays 1.4% more, taxpayer 2 pays 3.3% more.
Revenues need to keep up with inflation.
During bracket creep revenues grew too much. It's only fair that they grow slower than inflation for a while.
inflation-adjusted individual income tax revenues dropped from $514.05 billion in 1981 to $455.25 billion in 1984
Without the tax cuts and considering the 2 recessions, how much should revenues have dropped?
You seem to be saying that we can ignore inflation.
Not at all. Do you have any info on real after tax income over this time frame?
You're joking, right? 2 taxpayers, taxpayer 1 makes $50,000, taxpayer 2 makes $100,000. One bracket, 20% and no deductions or exemption. Year one, tax revenue $30,000.
Year 2, 6% inflation, incomes rise 6%. Incomes now $53,000 and $106,000. Tax revenue $31,800. Real tax revenue $30,000. No change.
Same scenario, now with 3 tax brackets. $0-$40,000 15%, $40,001-$90,000 20%, $90,001-$150,000 30%. Revenue year one, taxpayer 1 pays $8,000. Taxpayer 2 pays $19,000. Year 2, 6% inflation, incomes rise 6%. Taxpayer 1, income $53,000, pays $8,600, real tax $8,113. Taxpayer 2, income $106,000, pays $20,800, real tax $19,623.
Once again, according to page 12 of the Treasury document at http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf, indexing of individual income tax parameters did not begin until 1985. Hence, the 11.4 percent drop in real individual income tax revenues from 1981 to 1984 could not possibly have been due to the fixing the bracket-creep problem in 1985.