Slatestone Wealth chief market strategist Kenny Polcari provides insight into how Federal Reserve Chairman Jerome Powell may have impacted inflation concerns.
Millions of Americans could be in store for higher taxes as spiraling inflation pushes consumer prices higher.
The phenomenon, known as "bracket creep," results when taxpayers are pushed into higher-income brackets even though their purchasing power is essentially unchanged due to steeper prices for everyday goods.
Although the IRS adjusts federal income taxes for inflation, a recent analysis published by the Tax Foundation shows that 15 states fail to account for inflation when drawing the brackets for taxes on wage and income. Another 18 states do not index personal exemption tax to inflation.
Altogether, 22 states have at least "one major unindexed provision," which could mean higher taxes for millions of taxpayers amid a monthslong inflation spike that has shown no sign of slowing down.
US INFLATION EXPECTATIONS SURGE TO HIGHEST LEVEL SINCE 2013
Essentially, when tax brackets, the standard deduction or personal exemptions are not adjusted for inflation, that money loses value due to the higher price that consumers are paying for things like food, rent and gasoline, said the analysis, authored by Tax Foundation's vice president of state projects, Jared Walczak.