When the chained CPI, a new formula for the consumer price index on which cost of living adjustments will be based, was first floated as a possible deficit cutting measure, the Strengthen Social Security coalition analyzed the proposal and found where some of the hardest cuts would hit:
The chained CPI doesn't just cut future Social Security benefits for retirees, but public pensions and even how tax brackets are determined, meaning that low- and middle-income families would see tax increases. That message is getting some attention again now that the formula is on the table again in the Catfood Commission II proceedings. Here's an AP story:
WASHINGTON - Just as 55 million Social Security recipients are about to get their first benefit increase in three years, Congress is looking at reducing future raises by adopting a new measure of inflation that also would increase taxes for most families — the biggest impact falling on those with low incomes. [...]
Taxes would go up by $60 billion over the next decade because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new inflation measure. Annual increases in the standard deduction and personal exemptions would become smaller. [...]
In all, adopting the chained CPI would reduce Social Security benefits by $112 billion over the next decade. Federal civilian and military pensions would be $24 billion lower, according to the nonpartisan Congressional Budget Office.
If adopted across the government, fewer people would be eligible for many anti-poverty programs because the poverty level also would increase at a lower rate each year. That would result in fewer people living below the official poverty line, despite having the same income.
The tax increases would hit low-income families the hardest, while high-income taxpayers would see smaller changes. The wealthiest taxpayers already pay taxes at the highest marginal rate, currently 35 percent.
For example, by 2021, taxpayers making between $10,000 and $20,000 would see a 14.5 percent increase in their federal taxes with a chained CPI, according to an analysis by the Joint Committee on Taxation. Taxpayers making more than $1 million would get a tax increase of 0.1 percent.
In other words, screw the 99 percent, once again. Bad idea last summer, worse idea now.