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1 Nicole Kaeding, Inflation Indexing: A Taxpayer Protection for Marylanders 1 (2016)

handle is hein.taxfoundation/infixmd0001 and id is 1 raw text is: 








        Inflation Indexing: A Taxpayer Protection for
                              Marylanders

                                 Nicole Kaeding
                            Economist, Tax Foundation

                 Committee on Ways & Means, Maryland House of Delegates
                                February 2,2016

Chairperson Hixson, Vice-Chairperson Turner, Members of the Committee:

My  name is Nicole Kaeding, and I'm an economist at the Tax Foundation. For those
unfamiliar with us, we are a non-partisan, non-profit research organization that has
monitored fiscal policy at all levels of government since 1937. We have produced the
Facts & Figures handbook since 1941, we calculate Tax Freedom Day each year, we
produce the State Business Tax Climate Index, and we have a wealth of other data,
rankings, and information at our website, www.TaxFoundation.org.

I'm pleased to testifying today on House Bill 159, 160, and 161 which deal with inflation
indexing in the individual income tax code. While we take no position on legislation, I
plan to share some of our research on inflation indexing across the country and the
economic evidence related to these types of provisions.

Inflation Indexing is a Standard Feature in a Modern Tax Code

The federal government began inflation indexing its tax brackets in the 1980s. Many
states have copied those policies as a taxpayer protection as they modernize their tax
codes.

Forty-three states levy an individual income tax. Of those states, 24 fully index their
brackets to inflation. Nine of those states have single-rate income taxes, which are
inflation-indexed by their definition. California and Oregon partially index their
brackets. The remaining 18 states and the District of Columbia do not index their
brackets.

Inflation indexing a state's standard deduction is even more common; 32 states and the
District of Columbia index their standard deductions. Finally, 19 states and District of
Columbia index their personal exemption. Maryland does not index any of these
components of its income tax code.


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