Talk:Income tax in the United States

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Dollar amounts adjusted for inflation[edit]

There are a few places that mention the income amount that qualifies for certain tax rates. It's not clear to me though which of these are dollar amounts in terms of the time issued or is it in current dollar amount adjusted for inflation and purchasing power? If it's in terms of the amount at the time I would want to add the year it's talking about in case the reader wants to adjust it to present value. Emschorsch (talk) 21:13, 13 March 2016 (UTC)

Can you give a specific example from the article? Famspear (talk) 23:41, 13 March 2016 (UTC)

I was referring to the history of top rates section: "the top rate was its all-time high at 94% applied to income above $200,000". That and the bullet point 2 after are unclear. I assume the $200,000 is in terms of money at the time. Is there a standard way that people adjusted to 2007 money (is that not original research?)? I'm happy to go through and adjust the rates. It's also probably worth updating all those references to $2016 since a decent amount of time has passed. Emschorsch (talk) 02:08, 16 March 2016 (UTC)

I don't think they should be updated to 2016 because inflation is constantly changing the current value. Both could be listed for reference as it is for the 75% bracket in the same sentence, but the original values should definitely be part of the article. Wolfram Alpha is pretty good at converting money via inflation, in this case it is about $2.7 million today: [[1]]. I don't think that's considered original research because it's just math on the inflation rate that Wolfram is using. Jbeyerl (talk) 13:33, 16 March 2016 (UTC)
I essentially agree with editor Jbeyer1. Wikipedia articles are full of references to historical monetary values of things in years gone by. If someone wants to adjust a particular value in an article to reflect the effect of inflation, there are tools on the internet that make that conversion easy to do. Famspear (talk) 13:59, 16 March 2016 (UTC)
Fair enough. But would you be okay with my updating everywhere it says ($x in 2007) to ($x in 2016)? It seems like updating the article to include present value amounts every 10 years wouldn't be overly burdensome, but I can understand the argument against it too. Also I just noticed the chart right below where I was concerned about that has it in 2016 amounts so my concerns really aren't very major. I was trying to follow the link but footnote 68's site has disappeared. I could access it here. Should I change the ref to link to that or does a new reference need to be found? Emschorsch (talk) 15:24, 16 March 2016 (UTC)

The adjustments for inflation using Wolfram Alpha are a little questionable to me. It's not clear what method Wolfram Alpha is actually using as I do not get the same results as when adjusting here. It seems wise to defer to the government site on this one since they explicitly state their methodology (the average CPI of year y / the average CPI of year x). This is the only section where there are adjustments for inflation. I'd like to use the gov inflation tool to adjust all the 2007 numbers instead to 2015 and put a little blurb at the top of the "History of top Rates section" explaining the methodology used to adjust for inflation and citing the appropriate things. Another problem with Wolfram Alpha is that I can't figure out how recreate the 2007 number to even confirm if it's correct. — Preceding unsigned comment added by Emschorsch (talkcontribs) 04:06, 17 March 2016 (UTC)

I'm good with PUBLISHED inflation adjustments, as those are official. IRS published many inflation adjusted items for 2016 in Rev Proc 15-53, including 2016 tax rates and brackets. However, where an official inflation adjustment has not yet been released, anything about it is pure speculation, and should not be used, regardless of what technique is used to derive it. I agree with Emschorsch that we should update annually for key things, but I have mixed views on how often to update examples. We run on volunteers, after all. Note that there are lots more items than the 51 in the above Rev Proc that are annually adjusted. I have some discomfort with presenting historical amounts on a current dollars basis, and REALLY have discomfort adjusting those annually. Oldtaxguy (talk) 12:45, 17 March 2016 (UTC)
I agree and don't think we need to update it every year. In fact I quite overestimated inflation as 100k in 2007 is only 114k in 2015 so not an overly major difference, so updating every 10 or 20 years would be fine. The important thing to me is being able to interpret the chart. There should be an "inflation adjusted" measure for all the dollar amounts in the chart. This would require updating every time a new tax plan that adjusts the top rate is proposed. This has happened every 3-8 years which doesn't seem too much to ask since it already needs to be updated to reflect the new tax plan. Adjusting for inflation using CPI has its flaws but at the very least it gives a sense of what the money is worth today for buying a standard basket of goods. How do other articles handle historical dollar amounts? If there was a wikipedia article about Adjusting for Inflation that detailed the advantages and disadvantages of each method an easy system would be for each article to just link there and then make sure all dollar amounts are adjusted to at least within the last 10 years. Emschorsch (talk) 14:11, 17 March 2016 (UTC)
That's a good point about it not being clear how Wolfram Alpha calculates its values. It took me quite a few attempts to reproduce two of the examples in the article: [[2]] and [[3]]. Depending on how you ask it, Wolfram Alpha seems to sometimes use the CPI for January or December, and sometimes an annual average of some sort. Jbeyerl (talk) 13:52, 17 March 2016 (UTC)

I found a template for inflation that autoupdates!! There seems to be some legitimate concerns with using CPI to adjust for inflation for wealthy individuals. The discussion on the talk page of the template made me think that it was okay for now since according to one user the correlation is .99 (hopefully they add a template to adjust for capital inflation in the future). I think this addresses most of the concerns raised here. I plan on including this template for all the nominal values used in this article. I recognize that it's not a perfect measure but I find it very helpful to have a ballpark figure to get a sense of the different scales involved. Though, if there exists a good discussion of the problems with using CPI to adjust for inflation it would probably be good to include it in the reference. Emschorsch (talk) 03:20, 26 March 2016 (UTC)

The more I consider inflation adjusted items, the more uncomfortable I get with the idea. Showing inflation adjustments over a short period (such as 10 or even 20 years) can be useful. However, the entire concept falls apart over long periods, particularly when discussing 1913 vs. 2015. Societal and technological changes have rendered any attempts at price comparisons completely meaningless. Nearly all items in the market basket used for computation of consumer price levels will have been substituted out, and those few remaining will have such different weights as to be noncomparable. Examples: automobiles, telephones and gasoline are now components, but in 1913 were so rare as to not even be considered in prices. The price of bread is relevant now, where in 1913 the price of flour was more relevant, since those outside cities (the majority then) baked their own bread.
In addition, some of the inflation adjusted items in tax are adjusted according to statutory formulas or required indexes. Those items (such as 2017 tax brackets, not yet released), MUST not be adjusted until the official release of the item. The official version is right by definition, and anything different from the official version is wrong by definition. Oldtaxguy (talk) 12:44, 26 March 2016 (UTC)

Commentary moved from article to talk page[edit]

The following commentary was posted in the article, but really goes here:

Note toward the following information. We need better information on this than a NY Times article. This is not accurate information for those with post graduate degrees included in the upper tax bracket who net about 40% of their take home pay after state and local taxes and a tithe. For example, a doctor working for $335,000 who has 21+ years of education, school loans, and works a high stress job in this article is lumped with those who simply make their money off of investments. Couples who have studied hard, work hard, are paying off loans, and pay a high price during each and every week are lumped in this article in our mindset with millionaires and multimillionaires who tend to make their money off of sheltered investments. There is no "millionaire" tax bracket. Another example is two people with graduate or post-graduate degrees who make enough to fall in the top tax bracket. There is no room in our mentality for these hard working couples, the ideal couples we inspire them to become at each stage of their academic career. We judge those we deem to be "rich" and want to penalize them with left winged articles like the following. It is not an accurate view of the American public. — Preceding unsigned comment added by 76.18.185.31 (talkcontribs)

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