by Lyman Stone
February 19, 2014
Inflation indexing is a key reform vital to any tax modernization effort. It enables taxpayers to have greater confidence about future tax liabilities, and prevents un-transparent tax hikes on people whose incomes haven’t increased in real terms. Inflation indexing is especially important in states with many tax brackets on low-income taxpayers, who bear an especially heavy burden from “bracket creep.” With the consistent application of inflation indexing, policymakers can position their individual income tax code to be more neutral, stable, and transparent for all taxpayers.