The biggest single reason for higher projected U.S. tax receipts over the next decade has absolutely nothing to do with the rate increases on top earners that took effect last month.
That’s only responsible for raising taxes by 0.2 percent of the gross domestic product, according to Congressional Budget Office data released today.
What’s much larger can be traced to “bracket creep.”
Income increases faster than the inflation adjustments in the tax brackets, pushing more and more income into higher brackets.
That creepy effect, CBO says, will increase government revenues by 0.9 percent of GDP.
At least it’s not the late 1970s, when taxpayers faced a combination of double-digit inflation and tax brackets that didn’t automatically adjust.