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.