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Do taxes increase over time?
Old 06-19-2007, 10:29 AM   #1
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Do taxes increase over time?

Do taxes increase over time (are they inflationary) or do they stay fixed?

Here's a thought... I calculate expenses for retirement and project ways to cover them.

For example, I know groceries and commodity type needs will increase in cost over time. Utility costs would also increase over time.

Tax brackets increase each year (so the threshold for 10% and 15% brackets, for example, increase each year). So would taxes paid actually be "more fixed" than other expenses?

It was a thought, not sure how reasonable, but worth for planning/ discussion purposes.
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Old 06-19-2007, 11:08 AM   #2
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Originally Posted by jIMOh View Post
Do taxes increase over time (are they inflationary) or do they stay fixed?
In general, yes, they change with inflation.
There are notable exceptions: AMT for one.

Of course, with a change of administration in 2008, your taxes could
change in 2009, then in 2013, then in 2017, etc

Some things: like health care and college tuition seem to be on their
own inflation rate.
TJ
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Old 06-19-2007, 04:04 PM   #3
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IIRC, they are much lower now for many than they were in the 60s. There was a time when the top tax rate was 90%.
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Old 06-19-2007, 05:46 PM   #4
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taxes have been decreasing yearly as the brackets are inflation indexed and move upward by about 3% a year allowing higher incomes at lower rates
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Old 06-19-2007, 05:54 PM   #5
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taxes have been decreasing yearly as the brackets are inflation indexed and move upward by about 3% a year allowing higher incomes at lower rates
I would put it as, if you have a (nominally) fixed income that does not increase with inflation then yes, under present law your taxes will go down with the years as taxes are indexed to (CPI) inflation.

However if you have an income that goes up with the rate of inflation (meaning that the buying power of your income remains essentially flat) as measured by the CPI then your taxes will go up nominally but will remain flat as a percent of income.

The short answer is... No your taxes don't go up or go down.
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Old 06-19-2007, 05:59 PM   #6
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IIRC, they are much lower now for many than they were in the 60s. There was a time when the top tax rate was 90%.
I don't know if that is generally true. Yes the rates have come down but so have all of the deductions and loopholes that many used to avoid paying taxes. Keep in mind that payroll taxes (SS and Medicare) have gone up significantly as have property, gasoline, sales and other taxes. I suspect that the amount of tax that is paid out has not gone down since the 60's.
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Old 06-19-2007, 06:23 PM   #7
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I don't know if that is generally true. Yes the rates have come down but so have all of the deductions and loopholes that many used to avoid paying taxes. Keep in mind that payroll taxes (SS and Medicare) have gone up significantly as have property, gasoline, sales and other taxes. I suspect that the amount of tax that is paid out has not gone down since the 60's.
Good point...but you dont pay payroll taxes living off investment income
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Old 06-20-2007, 05:00 AM   #8
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Property tax is a huge issue. My sis in CT in a "normal" house pays something like $7k-8k in prop. tax. That's several times my Federal income tax and would be about 20% of my income!!!! That alone! (yikes!)
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Old 06-20-2007, 06:43 AM   #9
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If the income source changes the taxes will as well. In early retirement you may be spending your own money, savings and interest. Later the source may be social security and taxable IRAs, so instead of justing paying on the return you end up paying on the entire IRA withdrawal.
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