IRS releases 2026 income tax brackets with Trump law changes

[progree]

4. People should realize that the bracket changes do not and have not been keeping up with inflation

Last edited Fri Oct 10, 2025, 04:04 AM - Edit history (5)

since 2017 when they first started adjusting tax brackets according to the CHAINED CPI.

The chained CPI is a little less than the CPI (consumer price index) so the effect is slow bracket creep where people whose income has been keeping up with inflation, for example, pay slightly higher average tax rates with each passing year.

The chained CPI runs lower because it fully includes substitution. For example, if beef prices are skyrocketing and people switch some of their beef consumption to turkey necks and other lower cost meat, that reduces the increase in meat prices and may even result in lower overall average meat prices in the chained CPI.

The regular CPI has less of these substitution effects and is more in line with overall actual price increases.

Another thing: neither CPI measure includes actual home ownership costs -- not house prices, not mortgage payments, not homeowner insurance, not property taxes, not maintenance costs.

Instead, they use something called "owners' equivalent rent" where they ask homeowners what they think they can rent their house for if they were to move out. https://www.democraticunderground.com/?com=view_post&forum=1116&pid=101079

There doesn't appear to be a seasonally adjusted version of the chained CPI, so for comparison purposes, here are the time series for the CPI and chained CPI, both not-seasonally adjusted

CPI-U, NOT Seasonally Adjusted: https://data.bls.gov/timeseries/CUUR0000SA0

Chained CPI-U - NOT seasonally adjusted https://data.bls.gov/timeseries/SUUR0000SA0

Over 8 years:
Jan 2025 / Jan 2017
CPI 317.671/242.839 = 1.30818
Chained CPI 176.268/138.035 = 1.27698

1.30818/1.27698 = 1.02443

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Over 25 years:
Jan 2025 / Jan 2000
CPI 317.671/168.8 = 1.88194
Chained CPI 176.268/100.3 = 1.75741

1.88194 / 1.75741 = 1.07086

Edited to add the BLS time series links for the CPI and Chained CPI, and comparing the increase in both from January 2000 to January 2025. Also January 2017 to January 2025.