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    IRS Releases Inflation-Adjusted Tax Rates for 2023

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    Filers whose salaries have not kept pace with inflation could see savings on their federal income tax bills.WASHINGTON — The rapidly rising cost of food, energy and other daily staples could allow many Americans to reduce their tax bills next year, the I.R.S. confirmed on Tuesday.Tax rates are adjusted for inflation, which in typical times means incremental movements in the thresholds for what income is taxed at what rate. But after a year that brought America’s fastest price growth in four decades, the shift in rates is far more notable: an increase of about 7 percent.Other parts of the tax code will also be affected by the inflation adjustment. Those include the standard deduction Americans can claim on their tax returns.The shift would be slightly larger if not for a change Republicans made as part of President Donald J. Trump’s tax overhaul that was passed in 2017. It tied rates to a measure of inflation, called the chained Consumer Price Index, that typically rises more slowly than the standard Consumer Price Index. In September, chained C.P.I. was up about a quarter of a percentage point less, compared with the previous year, than standard C.P.I.In dollar figures, the shift will be largest at the highest end of the income spectrum, although all seven income brackets will adjust for inflation. The top income tax rate of 37 percent will apply next year to individuals earning $578,125 — or $693,750 for married couples who file joint returns. That is up from $539,900 for individuals this year. The difference: Nearly $40,000 worth of individual income is eligible to be taxed next year at a lower rate of 35 percent.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    An Uptick in Elder Poverty: A Blip, or a Sign of Things to Come?

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    In the 1960s, more than a third of older Americans lived in poverty. With the aid of federal programs like Medicare to help the elderly, the situation improved significantly. But last year, the poverty rate for those 65 or older increased, even as it sank for everyone else.The uptick offers new evidence that elderly people haven’t fared as well as younger generations in recent years, and some experts worry that it may signal a broader setback in the financial security of those past their prime working years.While 9.5 percent of the elderly population lived in poverty in 2020, that figure rose to 10.7 percent last year, the Census Bureau reported. The coronavirus pandemic was a central driver, disproportionately disrupting the employment and income of older people.They usually weren’t eligible for as much pandemic relief as families with children. And older workers left the labor force at higher rates than others as Covid-19 spread, and can have difficulty returning.That’s the situation that Walter Cox, 64, may find himself in. As an automotive technician at a car dealership in Tulsa, Okla., he never made more than $9.50 an hour, and wasn’t able to save money while raising two children. Nevertheless, he retired in 2020, as the physical labor — and rude customers — took a toll. He also got married, and he and his wife had about $2,000 in combined monthly income for most of 2021, which made for a comfortable if modest living.But when his wife had to leave for New Mexico to take care of her mother, the couple divorced, leaving Mr. Cox with a $765 Social Security check to cover all of his bills. That will leave him below the official poverty threshold of $12,996 for a person 65 or older living alone. He has been mowing yards for some extra income, but can’t do anything he had imagined doing in retirement, like a road trip to Yellowstone National Park.“I literally cannot afford to do anything but put gas in my car, buy groceries and pay my utility bills,” Mr. Cox said. “Because of the divorce, it’s looking pretty grim. But I’m hopeful that things improve.”For many older Americans, an inflation adjustment to Social Security payments — an 8.7 percent increase for 2023 was announced last week — will help next year. But people hitting retirement today often depend on Social Security as their only source of income, which wasn’t the program’s original intention.Poverty Rates by Age GroupIn 2021, even as the poverty rate sank for everyone else, it increased among seniors — rising above younger age groups for the first time in 15 years.

    Source: Census Bureau and Columbia Center on Poverty and Social PolicyBy The New York TimesOlder workers’ wages have grown more slowly compared with other groups over the past few years, and many didn’t have 401(k) accounts, or didn’t contribute enough to them, as companies closed their defined-benefit pension plans over the last couple of decades.“We’re getting more and more older people who lived through this experiment with do-it-yourself pensions, and they’re coming into this age group without the same kind of incomes that older people have,” said Teresa Ghilarducci, an economics professor at the New School who specializes in retirement policy. “I don’t think it’s a blip.”More on Social Security and RetirementMedicare Costs: Low-income Americans on Medicare can get assistance paying their premiums and other expenses. This is how to apply.Downsizing in Retirement: People selling their homes often have to shell out more to spend less. Here’s what to consider.Claiming Social Security: Looking to make the most of this benefit? These online tools can help you figure out your income needs and when to file.Even though the share of elderly people officially below the poverty line is low by historical standards in the United States, it remains among the highest in the developed world, according to the Organization for Economic Cooperation and Development. The average poverty rate for older Americans also masks far higher shares among more vulnerable groups, with nearly one in five Black and Hispanic women 65 or older falling below the official poverty threshold in 2021. It’s higher for single people, too — a reality forced on hundreds of thousands of older Americans whose spouses died of Covid-19.The poverty rate is also not a bright line when it comes to financial hardship. It doesn’t take into account debt, which more seniors have accumulated since the Great Recession. Moreover, nearly one in four people 65 or older make less than 150 percent of the federal poverty line, or $19,494 on average for those living alone. Another measure, developed by the Gerontology Institute at the University of Massachusetts Boston and called the Elder Index, finds that it takes $22,476 for a single older person in good health with no mortgage to cover basic needs, with the cost escalating for renters and those with health problems.“To some extent we’re splitting hairs when we talk about people who fall just above and just below, because they’re all struggling,” said Jan Mutchler, a demographer at the University of Massachusetts at Boston who helped devise the Elder Index. “The assumptions that go into what we’re calling hardship are just flawed.”That’s true for Juanita Brown, 77, who lives on her own in Galax, a small town in Virginia’s Blue Ridge Mountains. A farmer’s daughter, she worked as a nanny, and then a certified nursing assistant, and then a preschool teacher. Her husband worked in the local textile industry, and after raising two children, they had built a substantial nest egg.But then Ms. Brown’s mother developed Alzheimer’s disease and couldn’t support herself. Ms. Brown stopped working to take care of her, which cost another $500 per month in expenses. Her husband got prostate cancer, which required extended trips to the hospital in Winston-Salem, N.C.“That depleted us,” Ms. Brown said. After her husband died in 2019, she was left with a car payment and more bills that went unpaid during his illness. She took out another mortgage on her home to help cover them, along with the $1,465 she gets from Social Security on the fourth Wednesday of every month.Family photos on display in Ms. Brown’s home in Galax, Va.“When you sit down and look at your income, and what you got to pay for every month, you got to cut corners,” Ms. Brown said.That technically puts her above the poverty line. But that hasn’t left enough money to replace the dentures she lost three years ago, or to replenish her heating oil, which now costs up to $250 a tank. She uses her wood stove as much as she can, but it gets too cold at night, which aggravates her arthritis. She records every expense in a little booklet.“When you sit down and look at your income, and what you got to pay for every month, you got to cut corners,” Ms. Brown said. Sometimes, one of her sons will visit and leave her with $50, even though she knows they can’t afford it either.Many times before, Ms. Brown has leaned on the support of District Three Governmental Cooperative, a local agency that provides transportation, help navigating government benefits, opportunities to socialize and other services for older residents. Debbie Spencer, the agency’s director of aging and disability services, has seen more clients struggle over the last year to pay for groceries. Covid-19 also made it more difficult to reach her more isolated clients, who often lack internet connections.“We’re seeing people who don’t know whether to pay their utility bills, to buy food, or to buy medicine,” Ms. Spencer said. “They’re having to make decisions about what they’re going to do. We helped people last year, but we see more and more people calling us this year for help.”The agency also runs a training program for older workers, popular with people who’ve found their Social Security income inadequate to live on.To prevent the poverty rate from rising further, advocates for the elderly recommend three types of actions: shoring up employer-sponsored retirement programs, helping older people earn more by working longer if they need to, and basing eligibility for public benefits on a more realistic definition of economic hardship.In 2022, the Labor Department reported that while 72 percent of civilian workers had access to an employer-sponsored retirement plan, only about 56 percent took part in one. That, in part, is why the lowest one-fifth of the income distribution in households headed by seniors gets 80 percent of its income from Social Security.For those retiring today who do have a 401(k), a swooning stock market is forcing them to recalibrate what income they can expect going forward. And the millennial generation is likely to retire less prepared than its predecessors, because of higher loads of student debt.Those without adequate retirement savings often have to keep working late into their 60s and 70s. Emily Allen, interim president of the AARP Foundation, says too many seniors overestimate their ability to take a break — or are pushed out of jobs — and end up in a difficult situation.Becky Freeman, an employee of District Three Governmental Cooperative, a local agency that provides services to seniors, made a home delivery in Meadowview, Va.Ms. Freeman, right, reviewing bills with Mildred Sneed during a home visit.“Older workers who stepped away and want to get back into the work force often have to take jobs at a lower wage than they earned in the past,” Ms. Allen said. “It’s easier to get a job when you have a job. So often we encourage individuals just to get back into the work force, but then work to advance their skills.”To supplement low wages, the American Rescue Plan of 2021 temporarily made people over 65 eligible for the earned-income tax credit, for which they otherwise don’t qualify. Advocates for the elderly have pushed to make that change permanent, since the wage supplement is often enough to lift people out of poverty.Older people low on financial resources can also look forward to the drug pricing provisions of the Inflation Reduction Act, which will reduce the cost of medications in the coming years and provide subsidies for those living close to the poverty line.Meanwhile, though, most aid programs that had been created or strengthened in 2020 and 2021 are gone. Gail Gorlen, 77, started leaning more on her credit card after the Supplemental Nutrition Assistance Program went from sending her $170 each month — an amount increased during the pandemic — to $115. She feels lucky to have found an apartment in a subsidized senior housing complex in Joplin, Mo., when she and her longtime partner split up last year, and is hoping that her Medicare Advantage program will provide some extra help with food.But for now, even cooking all her food at home, the days before her benefit card arrives on the 20th of the month are stressful.“I’ve gotten to the point where I can only pay a percentage of my Visa — I can’t pay the whole thing off, I don’t have enough money in the month,” Ms. Gorlen said. “I keep charging, charging, charging.” More

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    Inflation Has Hit Tenants Hard. What About Their Landlords?

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    Publicly traded corporate landlords are reporting some of their highest margins ever, while smaller operators say rent increases are eaten up by costs.Of all the categories driving inflation in recent months, among the largest — and most persistent — is rent.In buildings with more than 50 units, tenants in one-bedroom apartments have been handed new leases costing about 17 percent more on average than they did in March 2020, according to CoStar Group, a Washington-based real estate data company. The Labor Department’s rent indicator — which includes ongoing leases, not just renewals — has steadily risen, to 6.7 percent last month over the previous August.So while tenants absorb rent increases that often exceed their income gains, are landlords minting money? It depends on the landlord.Publicly traded owners of sprawling real estate portfolios, like Invitation Homes, have enjoyed some of their best returns over the past few quarters. Things look very different, however, for Neal Verma, whose company manages 6,000 apartments in the Houston area.Earlier this year, Mr. Verma experimented with raising rents enough to cover the cost of spiking wages, property taxes, insurance and maintenance. Turnover doubled in the properties where he tried it, as people left for nearby buildings.“It’s crushing our margins,” Mr. Verma said. “Our profits from last year have evaporated, and we’re running at break-even at a number of properties. There’s some people who think landlords must be making money. No. We’ve only gone up 12 to 14 percent, and our expenses have gone up 30 percent.”Overall, the ferocious run-up in rents has been driven by tenants’ desire for more space and location flexibility created by remote work; rising interest rates that have locked would-be buyers out of the for-sale market; and cost increases on delayed maintenance. But the one factor landlords track most closely is their customers’ ability to absorb higher rents.Higher-earning tenants, who flock to newer buildings with more amenities, have been more willing to accept rent increases. Low-income renters, while seeing faster wage growth, have borne the brunt of higher prices for necessities like groceries and gasoline, and rents in older buildings are rising at a slower rate than in newer, nicer ones.“The reality is that rents can only rise as incomes rise,” said Jay Parsons, chief economist at the real estate data firm RealPage, noting that rent averages 23 percent of the monthly incomes across the apartments that RealPage tracks. “If people can’t afford it, you can’t lease it.”Geography also matters. Even among the largest landlords, those with a presence in Sun Belt cities such as Miami, Tampa, Nashville and Phoenix saw far faster rent growth than high-cost coastal markets like San Francisco, where rents fell substantially during the pandemic lockdowns as white-collar workers fled for remote locations.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Guaranteed Income Programs Spring Up City by City

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    Early in the pandemic, Alondra Barajas had a temporary job for the Census Bureau, doing phone work from the two-bedroom apartment she shared with her mother and four younger siblings. When that job ended in late 2020, she struggled to find employment.But Ms. Barajas learned from an ad on Instagram that she might qualify for an unusual form of assistance: monthly payments of $1,000 for a year.Since she started receiving the funds this year — while caring for her newborn, searching for a job and looking for a new place to stay — her outlook has seemed brighter.“It’s helped me from hitting rock bottom,” she said.The payments are part of a pilot program from the city of Los Angeles, one of the nation’s largest experiments with a guaranteed income. The idea is that the best way to close the wealth gap and give people the opportunity to build a more stable life is to provide unrestricted cash payments to some of the most vulnerable Americans.The concept, sometimes referred to as universal basic income, has had advocates for decades. Andrew Yang made it a centerpiece of his 2020 Democratic presidential campaign. At the same time, detractors have long argued that the approach incentivizes people not to work. Still, it is gaining traction, city by city.More than 48 guaranteed income programs have been started in cities nationwide since 2020, according to Mayors for a Guaranteed Income, a network of leaders supporting such efforts at the local, state and federal levels. Some efforts are publicly funded, and others have nongovernmental support. Jack Dorsey, the former chief executive of Twitter, donated $18 million to help the initiative.California has become the epicenter of the movement. The Los Angeles program, funded primarily by the city, benefits 3,200 people who have at least one child, as well as an annual income below the federal poverty level. Several cities have moved ahead with efforts using private money: Oakland pledged to give 600 low-income families $500 for 18 months, and in San Diego, some families with young children will get $500 a month for two years.Last year, the state set aside $35 million over five years for cities to carry out pilot programs, which can use different criteria, including income level, people leaving the foster care system and residence in low-income neighborhoods. An application process for municipalities to tap into those funds is underway.Beyond California, 300 Atlanta residents who live below the federal poverty level are receiving $500 a month for a year, and in Minneapolis, 200 residents from designated low-income neighborhoods will receive $500 a month for two years. This fall, 260 people living in motels or emergency shelters in Denver will receive a $6,500 payment and will get an additional $500 a month for 11 months, with payments planned for 560 more people.Michael Tubbs, who as mayor of Stockton, Calif., put in place one of the country’s first guaranteed income programs in 2019, notes that these payments are not meant to be a sole means of income but aim to provide a buffer for people to break the cycle of poverty.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    U.S. income growth slowed in July, and consumer spending barely grew.

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    Americans’ incomes rose more slowly last month — but, for once, those gains weren’t swallowed up by higher prices.Personal income, after taxes, rose 0.2 percent in July, the Commerce Department said Friday. That was slower than the 0.7 percent gain in June. But while the gains in June were more than offset by sharply higher prices, in July, Americans saw their inflation-adjusted incomes rise 0.3 percent as lower gas prices led to a respite from inflation.Consumer spending also cooled in July, as Americans pulled back on purchases of goods. Overall consumer spending rose 0.1 percent, the weakest showing since a decline in December and down from a 1 percent gain in June. Spending on services, which has rebounded sharply as the pandemic has ebbed, continued to rise, but more slowly than in prior months.The moderation in spending could be welcome news for policymakers at the Federal Reserve, who have been trying to tamp down demand without pushing the recovery into reverse.Income and spending, adjusted for inflation, are also among the indicators that economists at the National Bureau of Economic Research use to determine when a recession has begun. The gains in July are the latest evidence that the economy, though slowing, is not in a recession.Economists warn that the reprieve from inflation may prove temporary. But they say households should be able to keep spending as long as employers keep hiring and pay keeps rising. Income from wages and salaries rose 0.8 percent in July, the biggest gain since February. The Labor Department will provide data on employment and wages for August at the end of next week.Diane Swonk, chief economist at the accounting firm KPMG, said the underlying strength of the consumer economy reflected a handoff from the government, which helped support households and businesses with record spending earlier in the pandemic, to the private sector, which has roared back over the past year and a half.“We have seen the private sector really pick up that baton, which has been amazing,” she said. More

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    Biden Student Loan Plan Squarely Targets Middle Class

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    President Biden is offering what independent analysts suggest would be his most targeted assistance yet to middle-class workers — while trying to repair what he casts as a broken bridge to the middle class.WASHINGTON — The big winners from President Biden’s plan to forgive hundreds of billions of dollars in student loans are not rich graduates of Harvard and Yale, as many critics claim.In fact, the benefits of Mr. Biden’s proposals will largely go to the middle class. According to independent analyses, the people eligible for debt relief are disproportionately young and Black. And they are concentrated in the middle band of Americans by income, defined as households earning between $51,000 and $82,000 a year.The Education Department estimates that nearly 90 percent of affected borrowers earn $75,000 a year or less. Ivy League graduates make up less than 1 percent of federal student borrowers nationwide.Economists say the full scope of Mr. Biden’s plan, including significant changes meant to reduce the payments that millions of borrowers will make for years to come, will help middle-income earners from a wide range of schools and backgrounds.“You’ll have a lot more people who are making zero payments and will have significant loan forgiveness in the future,” said Constantine Yannelis, an economist at the University of Chicago’s Booth School of Business. “The relief to borrowers is going to be more targeted to the people who really need it.”Yet despite the appeal of such debt relief, the program still has set off a contentious debate as economists and political figures assess the full consequences of the plan. By some estimates, it will cost as much as a half-trillion dollars over the course of a decade, imposing a future burden on American taxpayers.The plan also could encourage colleges to raise tuition even faster than they already are. Schools could try to persuade borrowers to take on as much debt as possible to cover higher tuition, with the belief that the federal government would help pay it back.Some conservative and Democratic economists also say the program could add significantly to what is already the highest inflation rate in four decades. Evidence suggests those claims are overstated, however, and American shoppers are not likely to see prices spike because of the program.The announcements Mr. Biden made, including both debt forgiveness and a restart next year of loan payments for all borrowers after a nearly three-year pause, will most likely be a wash for consumer prices, a wide range of economists say.“Debt forgiveness that lowers monthly payments is slightly inflationary in isolation,” analysts from Goldman Sachs wrote in a research note on Thursday, “but the resumption of payments is likely to more than offset this.”What to Know About Student Loan Debt ReliefCard 1 of 5What to Know About Student Loan Debt ReliefMany will benefit. More

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    Has the U.S. economy been shrinking? New data will shed light.

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    Government data on Thursday will help answer a seemingly simple but surprisingly thorny question: Did the U.S. economy shrink in the second quarter?The Commerce Department’s initial reading showed that gross domestic product, adjusted for inflation, fell 0.2 percent (an annual rate of 0.9 percent) in the quarter. It was the second straight contraction, fanning fears that the economy was entering a recession, or perhaps that one had already begun.On Thursday, the government will release revised figures based on more complete data. Forecasters expect the new data to show that G.D.P. shrank by a bit less than previously calculated. (The numbers will be revised again next month.)But another number in the report is arguably more important: the government’s first estimate for gross domestic income in the second quarter.Gross domestic income is gross domestic product’s less-famous twin. In theory, the two indicators measure the same thing, economic output, from opposite sides of the ledger: One person’s spending is someone else’s income.In practice, though, the two indicators can diverge because the government can’t measure the economy perfectly. And recently, they have diverged considerably. In the first quarter, gross domestic product fell, while gross domestic income rose. The divergence matters because both numbers can’t be right — and some economists believe the figure on income is likely to be closer to the mark, because the government collects more detailed data on income. If they are right, and if the income numbers continue to look stronger, it would suggest that the economy kept growing in the first half of the year. That would ease concerns about a recession. More