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
- Many are, such as sales taxes, gas taxes, property taxes, and even tolls on highways
- But two important taxes that are excluded are income taxes – both individual and corporate – and Social Security taxes
- One way to include these is to look at revenues from income taxes and SS taxes as a percent of total national income
- Find SS taxes haven’t changed since the 1980s
- For income taxes, depends on your comparison period
- Income taxes are down as a % of GDP today compared to 2000
- 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
- If included, would raise overall annual inflation rate since 2010 by about 1 % point.
- I’m MW
Mary: And I’m Mary Walden for N C State Extension