What Republicans really like about the chained CPI is that it tends to show a lower inflation rate than the alternative, typically by 0.3 percentage point a year. The difference pencils out to significant dollars: Changing the inflation index immediately would raise about $125 billion over the next decade and nearly $500 billion in the decade after that, according to the Tax Policy Center.

Most of that money would come out of the pockets of middle- and working-class taxpayers. Most important, it would slow inflation adjustments to tax brackets. This would hurt those taxpayers because more of them would move into higher tax brackets purely because of inflation in their wages. High-income taxpayers who already pay the top tax rate wouldn't be affected the same way.

The chained CPI also would reduce inflation increases in provisions such as the standard deduction, personal exemption, earned income tax credit and the alternative minimum tax. Personal exemptions and the AMT are marked for repeal in the GOP tax bills, but if they survive or are supplanted by other inflation-indexed provisions, the chained CPI would represent a tax increase on their users. In any event, as Howard Gleckman of the Tax Policy Center recently observed, the Republican plan is to replace the inflation-indexed personal exemption with a larger but non-indexed child tax credit. Leaving the latter unindexed would erode its value over time.

What's insidious about the chained CPI is that its effect is modest at first, but compounds over time. After 10 years the shortfall compared with the standard CPI is more than three percentage points; after 20 years, more than six.


One other thing: Inserting the chained CPI into the tax code could be a Trojan horse to infiltrate other government programs, notably Social Security. But that would be only the start. The Congressional Budget Office noted in a 2010 report that the federal poverty level is indexed to a standard CPI; changing that to the chained CPI would affect all programs whose budgets or benefits are keyed to the poverty level, including Head Start, food stamps and "the National School Lunch Program, the Low-Income Home Energy Assistance Program, the Children's Health Insurance Program, and parts of Medicaid." Republicans already have their daggers out for some of these programs; the chained CPI would represent just the first prick.

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