NC State Ag Economist Dr. Mike Walden – “Are Taxes Included in the Government’s Price Index”


Mary:  I’m Mary Walden, with economist MW, welcoming you to the economic perspective.  Today’s program asks if taxes are included in the government’s price index.  Mike, one of the good-news items in today’s economy is the relatively low level of inflation, which has been running between 1 and 2% for the past several years.  Yet one question I hear asked is whether taxes are included in the government’s measure of prices.   Are they?

Mike: Summary Answer

  1. Many are, such as sales taxes, gas taxes, property taxes, and even tolls on highways
  2. But two important taxes that are excluded are income taxes – both individual and corporate – and Social Security taxes
  3. One way to include these is to look at revenues from income taxes and SS taxes as a percent of total national income
  4. Find SS taxes haven’t changed since the 1980s
  5. For income taxes, depends on your comparison period
  6. Income taxes are down as a % of GDP today compared to 2000
  7. But since 2010, all income taxes in the nation as a % of GDP have risen an average of 6% annually, much faster than the stated rate of inflation
  8. If included, would raise overall annual inflation rate since 2010 by about 1 % point.
  9. I’m MW

Mary:  And I’m Mary Walden for N C State Extension