Where the 25k$ and 34k$ thresholds for taxation set back in 1982 or wherever it was were never indexed for inflation. Back then those only nabbed some people in the upper middle class and above. Now pretty much everyone has much or most of their social security benefits taxed -- a benefit we already paid payroll taxes to create.
I'm a long long way from getting hit by the 3.8% NIST tax.
But I've been hit by the Medicare IRMAA part B and D premium surcharges once so far. Withdrawals from traditional IRAs plus selling some stock bumped me up in 2021 taxes IIRC. (Fortunately, unlike the NIST and the Social Security taxation thresholds, the Medicare premium surcharges are inflation-adjusted).
Social Security benefits taxation and the Medicare premium surcharges (and the NIST adder for the $200k+ folks) are examples of how one's actual marginal tax rate can be considerably higher than what are in shown in the conventional tax tables.
So can a mix of regular income and capital gains cause an actual bump up in marginal rates. Someone can be in the 12% or 22% tax brackets and earn a little extra income from work and end up actually having that extra taxed at 27% or 37% (12%+15% or 22%+15% respectively) because, besides being taxed at the 12% or 22% ordinary tax, it also pushes more of one's capital gains "up the stack" to where more of it is taxed at the 15% CG rate. Plus state income taxes of course for those of us in Minnesota and many other states.
There are some segments of DU that think anybody with any stocks at all is "rich", and having one's 401k portfolio being demolished by simultaneous stock market and bond market plunges as a "first world problem" (which is true). Or having one's annuity's purchasing power, like mine, being devastated by inflation. So don't let the outrage bother you.
With the core inflation rates stuck at nearly 5%, it would only take 14 years for prices to double and 28 years to quadruple -- meaning that effectively the non-inflation-adjustable thresholds would be effectively cut in half in 14 year or down to a quarter in 28 years. So what began as a rich person's tax becomes a mid-middle income tax in a generation.
I much appreciate your postings. There are certain kinds of postings here that I don't appreciate (not talking about any from you), but I just try to keep my yap shut or at least be gentle about them because we don't get all that much traffic here.
Edited to add - Another ticking time bomb is that tax brackets are being adjusted by the CHAINED CPI, which rises more slowly than the regular CPI (that little fuck-you provision is thanks to the Trump "tax cuts" that some people ballyhoo here). So there will in effect be considerable tax bracket creep in the years to come. And this is "permanent", it doesn't go away at the end of 2025 like most of the other personal income Trump tax changes .
= new reply since forum marked as read