Legislation

Trump’s tax cut will shrink in 2019 thanks to inflation switch

Last year’s big tax cut is about to start shrinking.

The Internal Revenue Service on Thursday announced the tax code’s parameters for 2019, implementing a new method for making inflation adjustments that will result in higher tax payments—and government revenue—over time.

The shift will cost Americans $133.5 billion over a decade, according to Congress’s Joint Committee on Taxation.

The tax law enacted last year lowered tax rates and reduced tax burdens for most households in 2018. It also required the IRS to switch to a different, slower-moving measure of inflation to adjust a variety of tax-code features for rising prices.

The standard deduction, tax brackets and other items will still increase most years, but now they will usually climb more slowly than they would have under the old formula.

The result: More income gets taxed at all, or taxed at higher rates.

An expanded version of this report appears at WSJ.com.


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