A Permanent fix

Conservativesí insistence on no new taxes is behind the crippling of our ability to support the infrastructure of the United States. Not only have they refused to increase the federal gas tax to adequately support the transportation infrastructure since 1993, due to inflation the effective gas tax rate has been DECREASING for more than 20 years! A simple fix to providing adequate funding for roads, bridges, etc. is to index the gas tax to inflation. From year to year it would have no more of an effect on the economy than it did the year before.

Many of the most effective government programs are officially linked to inflation including Social Security and the federal pension system. Many of the least effective programs are not, including the gas tax and the minimum wage. Not keeping up with inflation is a regressive force that compounds from year to year to cripple a program especially when the congress refuses to increase ANY tax.

Imagine if we kept the same amounts for any of these programs from 100 or more years ago. If we can never raise taxes we would be struggling to maintain services on drastically reduced revenue.

The federal minimum wage could be helped by indexing to inflation as many states are doing now. Increasing gradually would have minimal negative impact on the economy and potentially substantial positive impact because consumers would have more money to spend.

One of the reasons for future problems with the funding of the Social Security system is the cap on wages that contribute to the system. Again, donít just raise the cap, index it to inflation which should have been done when the program started and not in fits and starts along the way.

Iím sure there are many more opportunities for making other government programs solvent for the future just by building in an annual adjustment due to inflation (or deflation).

There are probably also some opportunities to decrease taxes using the same method. A recent example that was fixed is the alternative minimum tax. The income threshold for this tax was indexed to inflation in 2013 with the American Taxpayer Relief Act of 2012. If it can be done for tax thresholds, why canít it be done for other vital government programs?

©2015 David Nation

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