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Working Paper

Bracket Creep in the Age of Indexing: Have We Solved the Problem?

Indexation of the personal tax code for price-level changes represent some of the most significant elements of U.S. tax legislation in the 1980s. However, because the indexation provisions do not adjust personal tax-rate schedules contemporaneously, bracket indexation remains incomplete. This paper argues that, even ignoring the remaining problems associated with capital-income measurement, depreciation provisions, and so on, the potential distortionary costs of inflation/tax-system interactions remain high.

Suggested Citation

Altig, David, and Charles T. Carlstrom. 1991. “Bracket Creep in the Age of Indexing: Have We Solved the Problem?” Federal Reserve Bank of Cleveland, Working Paper No. 91-08. https://doi.org/10.26509/frbc-wp-199108