From CNBC: 2024-05-31 09:43:23

In the U.S., many financial thresholds are adjusted for inflation yearly, including 401(k) limits, Social Security benefits, and tax brackets to combat the rising cost of living. However, some thresholds like the federal minimum wage, at $7.25 since 2009, remain stagnant due to lawmakers’ discretion. Inflation adjustments have pros and cons, impacting households differently.

Minimum wage has not increased since 2009, resulting in a 29% value loss according to the Economic Policy Institute. Just 1.3% of hourly workers were paid at or below federal minimum wage in 2022. To combat this, 30 states and DC have adopted higher minimums, while the federal minimum remains fixed.

Social Security benefits are taxed at the federal level if income exceeds specific dollar levels. Thresholds remain unchanged since 1984, leading to more beneficiaries paying federal income tax over time as income rises. A specific income formula determines the taxable amount based on combined income.

Accreditation is required in the U.S. for private investments like hedge funds, determined by net worth or annual income thresholds from the early 1980s. The number of accredited investors has significantly risen, with over 24 million households qualifying in 2022 compared to 1.5 million in 1983.

Certain taxpayers must pay a 3.8% net investment income tax if their modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples, aiming to target high-income households. Since thresholds are not inflation-adjusted, more taxpayers may be subject to the tax over time.

Read more: Why the minimum wage and some tax breaks don’t budge despite inflation