Recipients are aware of it that the purchasing power of their Social Security benefits has been diminishing for decades. This is even though the cost-of-living adjustments are intended to help them keep afloat with rising inflation.
The reason mostly pointed out for such an issue is the erroneous financial index being used in setting the number of raises that retirees are getting. COLA’s are computed by assessing the price changes by utilizing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), The Motley Fool reports.
Much needed changes
That said, pundits on this field are in unison that the Consumer Price Index for the Elderly (CPI-E) requires some changes since CPI-W is under weighing some key spots like housing and healthcare, as these are just two areas that chomp up a huge share of retirees’ income.
Nonetheless, Boston College’s Center for Retirement Research has recently revealed something unexpected regarding the huge COLA that retirees are going to receive in 2022. Per the data, it was discovered that utilizing CPI-W left seniors better off in the current year, not to mention that it could do so in the foreseeable future.
COLA’s current formula putting retirees in a good spot
It is believed that switching to CPI-E would be better for Social Security retirees because the financial index would be weighing the costs for both housing and healthcare more heavily and therefore better reflect the inflation retirees experience over time. Further, checking at the historical data would also reveal that CPI-E would have ensued in retirees receiving significant raises.
Center for Retirement Research stated that the average yearly increase in CPI-E between the years 1983 to 2021 was 2.8 percent. This is compared to CPI-W’s annual increase, which was 2.6 percent. This translates to retirees losing 0.2 percent annually, which is said to be going on for decades.
The gap between these various price indexes is said to be narrowing down, though. During the first two decades following CPI-E’s creation, it went up by 0.4 percentage points annually, which is quicker than CPI-W. However, over the most recent 20 years, there was only a 0.5 percentage point difference between the two indexes.
In 2021, CPI-E exhibited a sluggish increase in prices than CPI-W did. Hence, if there was a change done in CPI-E, seniors would have settled with a smaller raise. Particularly if the pitched shift happened, elderly recipients would only have gotten a boost of just 4.8 percent.
This took place due to the rate of inflation, for the cost of healthcare has bogged down in previous years. Meanwhile, transportation costs have surged at a quicker pace. Further, CPI-W is leaning towards transportation while CPI-E favors the other.
In line with this, the ongoing Covid-19 pandemic has caused the majority of the public to shy away from hospital/doctor visits. This translates to the inflation rate of medical care being pretty low. This resulted in CPI-W getting a bigger raise for seniors than CPI-W would have.
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Many US Residents Migrated From The High-Tax States During The Pandemic
Rising living costs and increased inflation forced US residents to leave their homes and settle in low-cost areas. The individuals moved to states with low-income tax rates; many decided to shift for professional reasons. Yahoo Money reports that states with high-income tax witnessed a decrease in population in the past several months. Low tax states such as Florida, Texas, New Hampshire, South Dakota, Nevada, and Tennessee have recorded the most significant surge in population recently. Families can adjust their monthly budget in cheap areas and have a broader scope for financial growth.
People Move Because Of Several Factors
Yahoo Money quoted Jared Walczak, vice president of state projects with the Center for State Tax Policy at the Tax Foundation; he said, “People move to states with low-income tax for a multitude of reasons, sometimes it’s the most direct and obvious reason that it reduces the tax liability. Especially now that people have more capacity to move where they want, that will be a higher priority for some. There are also second-order effects, states with lower tax burdens and with more pro-growth and higher economic opportunity- and people will move to seek out those things even beyond their tax burdens.”
Low Tax States Present Higher Financial Security
Several US citizens can now efficiently manage their expenses and enhance their lifestyle after moving to new places. The migration has increased inflation in the low-tax areas. However, the living costs are still meager compared to their home states despite the price rise. Yahoo Money quoted Ramona Cedeno, CPA and founder of FiBrick; she said, “I’m one of the people that’s trying to leave New York City to minimize tax burdens. Just up north of New York in the county of Westchester. New York can also be expensive. Before COVID, we stayed in these high-tax states because there was another reason too. My office was based in New York City, and I had clients in California, which required me to be there physically; now that we can work remotely, you don’t have to see clients all the time. You can live anywhere.”
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California Workers Could Get Up To 2 Weeks Of Paid Time Off If They Or Their Family Members Are Covid Positive
Some respite for workers in California who are battling economic woes during another wave of Omicron Covid surge. California workers could be getting two weeks of paid time off if they get sick from COVID reports abc7.com.
California State had put in place a similar law last year. However, it expired in September after the COVID-19 situation stabilized and the spread of the virus slowed considerably.
Businesses would get up to $6 billion in tax cuts and other assistance
California workers will get up to two weeks of paid time off if they get sick from the coronavirus. In the same way, businesses would get up to $6 billion in tax cuts and other assistance. The above measures are a part of a proposal endorsed on Tuesday by Gov. Gavin Newsom and the state’s top legislative leaders.
The new law had to be proposed after spreading a more viral and contagious form of the virus, the Omicron variant, which spread like wildfire in California State. Significant donors to Democratic politicians in California, labour unions have pressured state officials to bring the paid sick leave law back.
California Business Groups oppose the latest proposals.
However, the latest move to provide extra sick leave has been opposed by Business Groups as many industries are already struggling to retain workers during the pandemic. Last year businesses could avail themselves of the federal tax credit, which helped provide some relief. However, Tax Credit is not available this year.
However, Newsom and legislative leaders have agreed to end some tax increases on businesses. The taxes were imposed in 2020 when state officials feared that the pandemic could precipitate a significant budget deficit. Instead, state revenues have soared during the pandemic. The taxes were supposed to end at the end of 2022.
However, state officials have decided to end it Newsom, and legislative leaders have agreed to end them one year early. Additionally, more money will be spent on a state grant program for businesses and not charge state taxes on some federal grants. It all adds up to about $6 billion for businesses.
Proposals must have the support of Democrats in California State Chambers.
The proposals were declared by Newsom and the state’s top two legislative leaders: Senate President Pro Tempore Toni Atkins and Assembly Speaker Anthony Rendon on Tuesday. However, Democrats hold large majorities in both chambers, and it would also require their support for the approval of the projects.
The proposal envisages workers getting one week of paid time off if their family members test positive for the virus. The companies will have to provide the coronavirus test and pay for it. Workers who don’t undergo these tests refuse to be tested will be barred from the scheme.
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Child Tax Credit And Stimulus Checks Create Confusion For Tax-Filing
Confusing and long tax season, the tax preparers seem to be bracing it. It is due to the child tax credits and the stimulus checks received by Americans in 2021. The stimulus amount and the credits were not received by many. However, many families were entitled to it, and so they can claim it this year.
Are there any rising questions from the public?
According to tax accountants, they are receiving many questions regarding CTC. Many families received it like a tax refund, six months early.
The Certified Public Accountant, Roy Mitchell, said the families who didn’t receive CTC can claim now. He says now is the time for claiming the amount of $3600 (up to) for every child, as per information provided by the Seattle Times.
Anyone can claim the stimulus check, which is missing as of now.
A lot of confusion is faced by the office of Roy Mitchell. It is from the people who are missing some amount of money and those who are not.
Smaller tax refunds confusion
Mitchell expects to hear from taxpayers who wonder why the refund is less than the previous year. It is because CTC was the advance on money that they used to receive at the time of filing. It is $1000 less this time.
The stimulus check of last year wouldn’t impact any refunds.
Check the mail for IRS letter
As per Mitchell, any parent having a child below 18 years of age should wait for filing until they receive the IRS letter. This letter will explain the amount received and the family’s own.
Anyone still confused about it all can talk with the tax pro. A talk with someone knowledgeable will help to get the money. They will also help to get 2021’s missing credit so that one doesn’t remain in vain of it, as per NBC4.
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