Tags: chained | cpi | tax | increase

Fiscal Conservatives: ‘Chained-CPI’ is $100 Billion Tax Increase

By    |   Tuesday, 30 Apr 2013 12:30 PM

A change in how the government measures inflation could result in a $100 billion tax increase, the limited government group Club for Growth tells Newsmax.

The so-called "chained CPI" proposal outlined in President Barack Obama’s fiscal 2014 budget is meant to save money in programs like Social Security by recalculating the cost-of-living adjustment through the Consumer Price Index.

But without a change in the tax code, the lower inflation adjustment change would force people into higher income brackets because wages usually rise faster than inflation.

Overall, benefits would be lower but taxes higher.

“Using chained CPI for tax brackets would represent a major tax increase over time,” says Club for Growth Spokesman Barney Keller. “Fiscal conservatives should only support chained CPI for slowing the growth of spending, not as an anti-growth tool to boost revenues.”

The Club for Growth, along with seven other fiscally conservative organizations, warned Congress about the potential tax hike in a letter this week.

“In the context of bracket-flattening tax reform which is revenue-neutral or a net tax cut, chained CPI may be an acceptable component,” the groups said in their letter. “But as a stand-alone tax measure, chained CPI is a $100 billion tax increase in the first decade alone.”

Liberals in Washington have criticized the proposal because it would result in fewer government benefits over time. But fiscal conservatives have embraced it as a positive first step in entitlement reform because it would hold down cost-of-living increases, although they still refuse to consider any tax increases as part of a budget deal.

“Over time, American families and small employers will find themselves facing a higher marginal income tax rate than they would absent the change to chained CPI,” the groups wrote. “Additionally, other tax provisions such as IRA and 401(k) contribution eligibility, etc. would grow more slowly if chained CPI were adopted.

The letter also included signatures by representatives from such heavyweight conservative organizations as Americans for Tax Reform, Heritage Action for America, and Americans for Prosperity.


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A change in how the government measures inflation could result in a $100 billion tax increase, the limited government group Club for Growth tells Newsmax.
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Tuesday, 30 Apr 2013 12:30 PM
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