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Inflation

Not only does inflation resemble a tax, it impacts taxes, too. Inflation can push taxpayers into higher income tax brackets or reduce the value of tax credits, deductions, and exemptions. This is known as bracket creep, which results in an increase in income taxes without an increase in real income.

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Infrastructure bill taxes inflation pressure on inflation returns to work incentives

Tax Reform and Infrastructure Investment: The Two Theories

The Biden administration does have a point about how some components of the infrastructure bill could put downward pressure on inflation in the long term. However, the taxes chosen to pay for those investments would counteract those effects, by reducing investment and productivity growth.

4 min read