This is tricky, which is why Obama thinks he can get away with it:
If the inflation number used for indexing tax brackets and the exclusion in the Alternative Minimum Tax is lower than the rate at which incomes increase in nominal dollar terms due to inflation, then there is a hidden tax increase (the old term was “bracket creep”). However, the author’s assertion that lowballing the inflation rate for application in the tax code constitutes a tax increase on all tax-payers seems unfounded. If, as you suggest, they pretend the inflation rate is zero, all the brackets and the like stay the same, so everyone whose income in nominal dollar terms is static won’t feel a tax increase — they’re just being screwed by inflation eroding the value of their income.
Much obliged. I have to conclude that this “tax increase on 100% of the middle class” statement is, at best, overreaching. Almost by definition, if you’re nicked by AMT, that’s proof enough that you’re not making “middle class” money.
Similarly, any indexing of the Standard Deduction from one year to the next affects more but still nowhere near “100%”, as some use it and some don’t. Even non-AMT bracket creep certainly cannot affect 100% — we all know that less than 100% of middle class incomes are keeping up with inflation, whether it’s measured accurately or not, and far fewer than whatever percentage that actually is are close to any of the brackets anyway.
I don’t know what seems so obvious to Ed Harris.