Taxes, Spending, and Deficits Topic Index

EconData Online keeps you informed on today's most crucial economics data. Steve Hackett and Bud Culbertson (Humboldt State) provide commentary, analysis, and current and historical data. Return to EconData topic index.

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Consumer Price Index (CPI)

The U.S. and many other countries have progressive income taxes, meaning that people in higher income brackets pay a higher percentage of their income as tax than do people in lower income brackets. If the income brackets are not indexed to the inflation rate, then the result is "bracket creep," in which wage inflation pushes more and more people into the higher income brackets, even though their real wages may not have increased at all.

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Real GDP

Increases in real GDP produce higher tax receipts because business and personal income rises as real GDP rises. Moreover, welfare and social service expenses tend to decline when real GDP rises because more people are able to find work and achieve independence. Thus governments are more likely to have a budget surplus during economically good times, while the opposite is true during recessions.

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Real Per-Capita Disposable Income

Disposable personal income is the portion of personal income that is available for consumption spending or saving after personal taxes are taken out. Thus real per-capita disposable personal income can be increased (at least in the short run) by a cut in the personal tax rate.

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