Federal law is full of fixed dollar amounts. The law sets a minimum wage, an asset limit, or an income level where a tax starts. Each amount made sense on the day Congress wrote it.
Then prices and incomes rise, and the amount stays where it was. I call these amounts "magic numbers." A magic number is a dollar figure written into law that only a new act of Congress can change.
The federal minimum wage is the plain example. It has been $7.25 an hour since July 24, 2009. Congress has not passed a new bill since then. Meanwhile the typical full-time worker's pay rose by about 70 percent.
The current approach is slow. Each update needs a new bill, a new fight, and a new vote. Between those votes, the number loses meaning a little each year.
Congress has fixed part of this problem. Many amounts now rise each year with a price index. But prices tell us what a basket of goods costs, not what people earn.
My argument is simple. Congress should tie each of these amounts to a percentage of median income, or to the average wage where no median exists. It should also build a free national payroll service, so that the income data is current and complete.
Two kinds of magic numbers
The dollar amounts in federal law fall into two groups. The first group is frozen, and only a new bill can move it.
The second group rises each year, but by the wrong measure. Most follow the Consumer Price Index (CPI) or its "chained" version. One follows the average wage and shows the better approach.
Some magic numbers are not dollars at all. Federal law also fixes ages, such as the Social Security retirement age. Those ages should follow life expectancy. I cover them after the dollar proposals.
Numbers the law has frozen
Federal minimum wage. The Fair Labor Standards Act sets the wage floor for most workers. It has been $7.25 since July 24, 2009. When the 1991, 1997, and 2009 increases took effect, the minimum equaled about 40 percent of median full-time pay. Today it equals about 23 percent.
Tipped minimum cash wage. Employers may pay tipped workers $2.13 an hour in cash and count tips toward the rest. That figure dates from 1991, when it was half the minimum wage. A 1996 law fixed it at $2.13 in dollars, and it has not changed since.
Overtime salary threshold. Salaried managers and professionals are exempt from overtime only if they pass a duties test and earn at least a set salary. The threshold is $684 a week, or $35,568 a year. The Department of Labor set it in 2019. A 2024 rule raised it, but a federal court vacated that rule in November 2024. In May 2026 the department formally restored the 2019 level.
Capital loss deduction. Investors who lose money can deduct up to $3,000 of net losses against wages each year. That limit took effect for tax years after 1977. Adjusted for prices, $3,000 from 1978 equals about $15,400 today.
Taxation of Social Security benefits. Retirees pay income tax on part of their benefits once "combined income" passes $25,000 for a single filer or $32,000 for a couple. Congress set those levels in 1983. It added a second tier at $34,000 and $44,000 in 1993. None of these amounts has ever changed. In 1983 Congress aimed this tax at upper-income retirees. Because the amounts never move, the tax reaches further down the income scale each year.
Net Investment Income Tax and Additional Medicare Tax. Both taxes began in 2013. Both start at $200,000 for single filers and $250,000 for joint filers. Neither threshold adjusts. Adjusted for prices, $200,000 from 2013 equals about $287,600 today.
Home-sale exclusion. A homeowner can exclude up to $250,000 of gain on the sale of a main home, or $500,000 for a couple. Congress set these caps in 1997 and did not index them. Adjusted for prices, $250,000 from 1997 equals about $521,700 today.
Supplemental Security Income (SSI) asset limit. SSI pays cash to people with low income and few assets who are elderly, blind, or disabled. A person cannot have more than $2,000 in countable assets, or $3,000 for a couple. These limits have not changed since 1989. Adjusted for prices, $2,000 from 1989 equals about $5,400 today.
State and local tax (SALT) deduction cap. The 2025 tax law (Public Law 119-21) raised the cap from $10,000 to $40,000 for 2025. It sets $40,400 for 2026 and adds 1 percent a year through 2029. In 2030 the cap drops back to $10,000. A fixed 1 percent step is not an index. In 2030 the law returns to a frozen $10,000.
Information reporting (Form 1099). For decades, businesses had to report payments of $600 or more to contractors. The 2025 tax law raised this to $2,000 for payments after 2025 and indexes it after 2026. Congress needed decades and a large tax bill to move one small number.
Numbers indexed to the wrong thing
Several amounts already rise each year without a new bill. A fair case must say so. The problem with these is not that they are frozen. The problem is the measure they follow, or the base they started from.
Tax brackets and the standard deduction. These rise each year with the chained CPI, under the 2017 tax law. The 2025 tax law made those brackets permanent. For 2026 the standard deduction is $16,100 for a single filer and $32,200 for a couple. The 22 percent bracket starts at $50,400 for a single filer.
Gift tax annual exclusion. A person can give $19,000 to each recipient in 2026 without filing a gift tax return. This amount follows prices and rises only in $1,000 steps. It stayed at $19,000 from 2025 to 2026.
Estate tax exemption. The 2025 tax law set the exemption at $15 million for 2026. After 2026 it rises with the chained CPI.
Poverty guidelines and thresholds. The 2026 federal poverty guideline for a family of four is $33,000. The Census Bureau's official threshold for the same family in 2025 was $32,970. Both rise each year with the CPI. But the base dates from 1963 and 1964. Mollie Orshansky, an analyst at the Social Security Administration, built it from the cost of the cheapest government food plan. She multiplied that cost by 3, because families of three or more had spent about one-third of their after-tax income on food in 1955. Since then, the thresholds have mostly just followed prices.
SNAP and other benefit limits. Many programs set eligibility as a percentage of the poverty guideline. SNAP, formerly food stamps, generally requires gross income at or below 130 percent of it. So these limits inherit the guideline's 1960s base. SNAP's asset limits are $3,000, or $4,500 for households with an older or disabled member, for fiscal year 2026. They rise with prices.
Medicare premium surcharges (IRMAA). Medicare charges higher Part B premiums to higher-income people. For 2026 the surcharge starts above $109,000 for single filers and $218,000 for couples. The lower brackets rise with the CPI. The top bracket, at $500,000 or $750,000, stays fixed until 2028.
Medicare Part B standard premium. This one is not a magic number. A formula sets it to cover about 25 percent of expected costs for an aged enrollee. For 2026 it is $202.90 a month. A formula tied to actual costs does what this essay asks for, so I leave it alone.
Social Security earnings test. Social Security withholds some benefits from people who claim early and keep working. In 2026 the limit is $24,480 a year, or $65,160 in the year a person reaches full retirement age. These limits rise each year with the national average wage index. This is the model. The law already uses a wage measure here.
Why fixed numbers fail
A fixed number forces Congress to act again and again. Each update needs time in both chambers, enough votes, and a bill to carry it. Most years these do not line up, so the number drifts. The minimum wage has now gone 17 years without a change. That is the longest gap since Congress created it in 1938.
The drift is not neutral. When a benefit limit stays fixed, fewer people qualify each year. When a tax threshold stays fixed, more people pay each year. Nobody votes for these changes. They happen by default.
The drift also invites large, sudden corrections. The 2024 overtime rule tried to catch up in two big steps and did not survive in court.
An index removes most of this work. Congress sets a rule once, and the number moves each year without a new bill. Congress can still change the rule.
Why the CPI is the wrong foundation
The CPI is a careful statistic. The Bureau of Labor Statistics (BLS) builds it to measure the average change in prices for a basket of goods and services. That is a useful question. But it is not the question most thresholds ask.
A threshold asks where a person stands compared with everyone else. Is this family poor? Is this income high enough to pay a surtax? Those are questions about income, not prices.
The CPI also has specific features that make it a weak base for law.
It builds in substitution. Since January 1999, the CPI has used a formula that assumes people switch to cheaper items within a category. The chained CPI goes further and assumes switching across categories. If beef costs more and people buy pork, the chained index rises less than a fixed basket would. From 2001 to 2023, the chained CPI grew about 0.2 percentage points a year slower than the regular CPI-U. Tax brackets use the chained version.
It measures owned housing by imagined rent. For homeowners, the CPI does not use home prices or mortgage payments. It uses "owners' equivalent rent," which follows what similar homes rent for. That item carried about 26 percent of the whole index in December 2025. A young family trying to buy a first home faces prices the index does not track.
It adjusts for quality. When a product improves, the BLS removes the value of the improvement from the price change. Its own example shows a $250 television replaced by a $1,250 model. After adjustment, the index records a 7.1 percent price drop. That is a fair answer to a price question. It says little about what a household must spend.
Its methods change over time. In 1983 the BLS switched owned housing from purchase costs to rental equivalence. It fixed a formula problem in 1995 and 1996. In 1996 a commission appointed by the Senate Finance Committee estimated that the CPI overstated inflation by about 1.1 percentage points a year. The BLS adopted the geometric mean formula in 1999.
Each change may improve the index. But the BLS does not rewrite the published CPI-U to match. So a CPI point in 1980 and a CPI point in 2020 rest on different methods. The BLS publishes a research series, the R-CPI-U-RS, that applies current methods back to 1978. It gives a different history. From 1978 to 1982, the CPI-U rose 57.2 percent, and the research series rose 50.1 percent.
The BLS revises the chained CPI. The regular CPI-U is final when published, except for seasonal factors. The chained CPI is not. The BLS publishes it in preliminary form and revises it three times. Final values arrive 10 to 12 months later. This is the version the tax code uses.
It depends on field surveys. The October 2025 lapse in federal funding stopped data collection. The BLS published no CPI-U value for October 2025. The same lapse left no BLS median earnings figure for the fourth quarter of 2025.
None of this means the BLS does poor work. The CPI answers a different question from the one thresholds ask. And because the method keeps changing, the same number means different things across decades.
Why income data is better
Income data measures what the law cares about directly. It shows what people earn, and it shows where the middle is.
The best income data comes from records, not surveys. Employers file a Form W-2 for each worker they pay. The Social Security Administration (SSA) uses those forms to build the national average wage index. For 2024 the index is $69,846.57. The 2023 records covered about 174 million wage earners.
The same records give a median. For 2023, half of all wage earners had net compensation at or below $43,222.81. SSA publishes this figure every year.
Census and BLS surveys add useful cross-checks. The Census Bureau reports a 2025 median household income of $87,460. The BLS reports median weekly earnings of $1,251 for full-time workers in the second quarter of 2026. These surveys capture household income and hours, which W-2 forms lack. But surveys depend on response. The 2026 Census income survey had a response rate of 61.3 percent.
The law already trusts wage records. The average wage index updates the Social Security earnings test, the benefit formula, and the maximum earnings subject to Social Security tax.
Income measures have real drawbacks. W-2 data arrives late. Social Security, for example, indexes a worker's earnings to the wage index from 2 years before eligibility. An average can rise because top earners gain, even when the middle does not. In 2023, about 67.6 percent of wage earners earned less than the average. I address these points in the counterarguments below. The short answer is to prefer medians and to fix the lag.
A free national payroll service
Indexing to median income needs current median income data. Today the United States gets that data late and in pieces. Employers report each worker's wages to the federal government once a year, on Form W-2. Surveys fill the gaps with samples.
I propose a better source. The federal government should build a free national payroll service and require every employer to use it.
What it would do
The service would run payroll for every employer in the country, free of charge. Each pay period it would record wages, hours, deductions, withholding, and employer contributions. It would pay workers, send taxes where they belong, and issue pay statements.
Other countries already do parts of this. The United Kingdom's Real Time Information rules began on April 6, 2013. Employers must report pay and tax to HM Revenue and Customs each time they pay workers. Australia's Single Touch Payroll became mandatory on July 1, 2018 for employers with 20 or more employees. It covered smaller employers from July 1, 2019.
Italy has required electronic invoices between businesses, and to consumers, since January 1, 2019. Each invoice passes through a central exchange run by the revenue agency. Mexico requires an electronic tax receipt, the CFDI, for invoices. Since 2014 employers must also issue one for each payroll payment.
These are mandatory reporting rules. Employers still run payroll through their own software or a private provider. The UK and Australia receive the data. They do not process the payroll. My proposal goes one step further. The government would run the payroll itself, as a free public service.
What the data would show
A national payroll service would give the country a complete, current record of paid work. It would show employment, hours, and pay by industry, region, and occupation. It would show the median and average wage each month.
The UK already shows what this looks like. HMRC and the Office for National Statistics publish payroll statistics each month. On September 15, 2026, they reported 30.2 million payrolled employees for August 2026. They reported median monthly pay of £2,657. That release came about two weeks after the month ended.
The UK figures are not perfect. The first estimate for each month uses about 85 percent of the data, and the next release revises it. Most revisions fill in late records rather than change the method.
With such data, the United States could compare every threshold with actual pay each year. The two-year lag would shrink to weeks. Sampling error from surveys like the Current Population Survey would largely disappear for wage data. Hours would be on record for every worker, so an hourly median would rest on records too.
The end of the annual return for most wage earners
A national payroll service leads to a second benefit. If the government already sees every paycheck, deduction, and withholding, the annual tax return becomes unnecessary for most wage earners.
The UK shows how. Under Pay As You Earn, employers usually apply each worker's tax code on a cumulative basis. Each payday, the calculation looks at pay and tax so far that year. HMRC says this makes the year's tax "roughly correct for most cases."
As a result, most UK employees never file a return. HMRC expected about 12 million Self Assessment returns for the 2024 to 2025 tax year. The UK has about 30 million payrolled employees. Many of those 12 million filers are self-employed people or landlords.
Sweden takes a different route to a similar result. Employers, banks, and the social insurance agency report income to the tax agency. The agency fills in each person's return in advance. People who need no changes can approve it by e-service, text message, or phone call. Australia's payroll reports also mark each worker's income statement "Tax ready" for filing.
US withholding is less precise. Employers withhold from each paycheck based on a form the worker fills in, and most workers settle up on an annual return. The IRS estimates that the average nonbusiness taxpayer spends $160 and 8 hours filing.
A national payroll service would change that. With every paycheck on record, the IRS could compute each wage earner's tax for the year. It would then send a bill or a refund. The worker could check the numbers and correct them.
This step depends on the mandatory payroll service. Today the IRS gets most wage data on W-2 forms after the year ends. Only complete, timely payroll records let the IRS compute the tax itself. For most wage earners, the annual return would go away.
The United States tried a smaller step. The IRS Direct File program let some taxpayers file free on the IRS website in 2024 and 2025. Treasury suspended it in October 2025, citing cost and low use. Filers sent only about 309,000 returns through it in 2025. A pre-computed bill would not depend on people seeking out a tool. It would arrive on its own.
Concerns and responses
Privacy and security. A single payroll service would hold sensitive data on nearly every worker. That demands strict rules. Statistical agencies should receive only de-identified records. The law should bar any other use of the statistical files.
The United States has models for this. Title 13 makes census responses confidential. Disclosure can bring up to 5 years in prison and a $250,000 fine. The Confidential Information Protection and Statistical Efficiency Act (CIPSEA) protects data collected for statistical purposes.
I should be honest about one point. The same service would also compute tax withholding. So it cannot sit fully behind a statistical wall. The law must separate the tax function from the statistical function and state who may see what.
Small-business burden. The service would be free. For many small employers, it would replace a fee they already pay to a private payroll firm. It could also replace separate wage filings to several agencies. The UK offered free reporting software to employers with 9 or fewer staff when Real Time Information began.
Political feasibility. Payroll and tax preparation firms would resist. The history of free filing shows this. In 2002 the IRS agreed with private tax software firms not to build its own filing tool. That clause stayed in place until 2019.
A phased path would help. First, offer the national payroll service as a free public option. Second, require every employer to report each pay run, as the UK and Australia do. Third, require use of the national service once it has proven itself.
What payroll data cannot do
Payroll covers wages only. It does not capture self-employment income, business profits, rents, or investment income. Self-employed people, investors, landlords, and people with complex situations would still file returns.
Tax returns would also remain the source for household income, since households combine several earners and several kinds of income. Payroll data gives the timely wage signal. Tax returns and Census surveys give the fuller household picture.
This service ties the whole proposal together. Congress cannot index the law to median income without timely median income data. A free, mandatory national payroll service is how the country gets it.
Proposals
Each proposal below ties a number to one of four measures:
- Median full-time weekly earnings, from the BLS: $1,251 in the second quarter of 2026. Divided by 40, that is $31.28 an hour.
- Median wage, from SSA W-2 records: $43,222.81 for 2023.
- Average wage index, from SSA: $69,846.57 for 2024.
- Median household income, from the Census Bureau: $87,460 for 2025.
The national payroll service would later replace the survey-based measures with records. Where a formula gives less than current law, the current amount should stay until the formula catches up.
| Number | Current value | Current anchor | Proposed anchor | Value today |
|---|---|---|---|---|
| Minimum wage | $7.25/hour | None (2009) | 40% of median full-time hourly pay | $12.51 |
| Tipped cash wage | $2.13/hour | None (1991) | 50% of the minimum wage | $6.26 |
| Overtime salary threshold | $684/week | None (2019) | 72% of median full-time weekly pay | $901/week ($46,837/year) |
| Poverty guideline, family of 4 | $33,000 | CPI on a 1963 base | 38% of median household income | $33,235 |
| SNAP asset limit | $3,000 / $4,500 | CPI | 1 month of median full-time pay; 1.5 times for older or disabled | $5,421 / $8,131 |
| SSI asset limit | $2,000 / $3,000 | None (1989) | 1 month of median full-time pay; 1.5 times for couples | $5,421 / $8,131 |
| Standard deduction | $16,100 single | Chained CPI | 37.5% of median wage; double for couples | $16,209 / $32,417 |
| Tax bracket thresholds | 22% bracket at $50,400 single | Chained CPI | Each threshold at its 2026 multiple of the median wage | Same as 2026 at the start |
| Gift tax annual exclusion | $19,000 | Chained CPI, $1,000 steps | 44% of median wage | $19,018 |
| Estate tax exemption | $15 million | Chained CPI after 2026 | 172 times median household income | $15.04 million |
| Capital loss deduction | $3,000 | None (1978) | 25% of median wage | $10,806 |
| Social Security benefit tax, first tier | $25,000 / $32,000 | None (1983) | 50% / 64% of median household income | $43,730 / $55,974 |
| Social Security benefit tax, second tier | $34,000 / $44,000 | None (1993) | 68% / 88% of median household income | $59,473 / $76,965 |
| NIIT and Additional Medicare Tax | $200,000 / $250,000 | None (2013) | 2.3 / 2.9 times median household income | $201,158 / $253,634 |
| IRMAA first bracket | $109,000 / $218,000 | CPI | 1.25 / 2.5 times median household income | $109,325 / $218,650 |
| IRMAA top bracket | $500,000 / $750,000 | None until 2028 | 5.75 / 8.6 times median household income | $502,895 / $752,156 |
| Home-sale exclusion | $250,000 / $500,000 | None (1997) | 6 / 12 times median household income | $524,760 / $1,049,520 |
| SALT cap | $40,400, then $10,000 in 2030 | Fixed 1% steps | 46.5% of median household income | $40,669 |
| Form 1099 threshold | $2,000 | Chained CPI after 2026 | 5% of median wage | $2,161 |
| Social Security earnings test | $24,480 / $65,160 | Average wage index | Keep as is | $24,480 / $65,160 |
| Medicare Part B premium | $202.90/month | Cost formula | Keep as is | $202.90 |
The reasons for each choice are short.
- Minimum wage at 40 percent. When the 1991, 1997, and 2009 increases took effect, the minimum equaled 40.3, 41.3, and 39.3 percent of median full-time pay.
- Tipped wage at 50 percent. This restores the split that held in 1991, before the 1996 law froze the dollar amount.
- Overtime threshold at 72 percent. The 2004 rule took effect at 72.0 percent of median full-time pay. The 2019 rule took effect at 71.5 percent. This level is well below the $1,128 step that the court rejected.
- Poverty guideline at 38 percent. This keeps today's line as the start. After that, the line tracks typical living standards instead of a 1963 food budget.
- Asset limits at one month of pay. A small emergency fund should equal about a month of typical earnings. For SSI, this roughly equals the 1989 limit adjusted for prices.
- Tax thresholds at 2026 ratios. Rising real wages would no longer push people into higher brackets.
- Gift, estate, IRMAA, and SALT amounts at current ratios. These start from today's levels, then grow with typical incomes. The IRMAA top bracket should not wait until 2028.
- Capital loss limit at 25 percent of the median wage. This restores most of the lost value. It stays below full price restoration, about $15,400, because losses already get favorable treatment compared with gains.
- Social Security benefit tax at half of median household income. This moves toward the 1983 intent without the full revenue cost of price restoration, about $84,100.
- NIIT and Additional Medicare Tax near current levels. Congress aimed these at high earners. Starting from today's ratio avoids a revenue windfall and keeps the affected group the same size.
- Home-sale exclusion at 6 times median household income. This roughly restores the 1997 value, about $521,700 in today's prices.
Magic numbers that are not dollars
Some magic numbers are ages. Dollar amounts should follow median income. Ages should follow life expectancy, the statistic that matters for an age. The principle is the same: set the rule once, not the number.
Social Security full retirement age. The age for a full benefit was 65 until the 1983 amendments raised it in steps. It is 67 for people born in 1960 or later. Workers can still claim a reduced benefit at 62. Each year of delay adds 8 percent, up to age 70.
The Social Security Trustees report period life expectancy at 65. In 1940, it was 11.9 years for men and 13.4 years for women. In 1983, it was 14.3 and 18.6 years. In 2024, it was 18.3 and 20.8 years.
Since 1983, men gained 4.0 years at 65 and women gained 2.2 years. The full retirement age rose 2 years. But the law wrote 67 as a fixed number, so it stops there.
Other countries use a rule. Denmark has tied its pension age to life expectancy since 2006. In May 2025, its parliament voted to raise the age to 70 in 2040. The governing party wants a new model before the next vote in 2030. Sweden sets its target age at 65 plus two-thirds of the gain in life expectancy at 65 since 1994. Finland ties the age to life expectancy for people born in 1965 or later, with each change capped at 2 months a year. The Netherlands also links its age to life expectancy at 65.
My proposal follows Sweden. Start from 67 in 2027, when the first people born in 1960 reach that age. Then raise the full age by two-thirds of each later gain in life expectancy at 65. In the Trustees' intermediate projection, life expectancy at 65, averaged for men and women, rises about 1.4 years from 2027 to 2050. Two-thirds of that gain is about 11 months. Age 70 would move by the same amount.
I would keep age 62 fixed. A higher full age cuts benefits at every claiming age, and the gains have not been equal. Chetty and colleagues found that from 2001 to 2014, life expectancy at 40 rose 2.34 years for men in the top 5 percent of incomes. It rose 0.32 years for men in the bottom 5 percent. People in hard jobs need an exit at 62, even with a reduced benefit.
Medicare eligibility age. Medicare has started at 65 since President Johnson signed it on July 30, 1965. Since 1965, life expectancy at 65 has risen 5.4 years for men and 4.5 years for women.
The tradeoff is real. The Urban Institute studied a move from 65 to 67 and found federal savings of $24.1 billion. But total health spending for people aged 65 and 66 would rise from $115.7 billion to $133.1 billion. Employer premiums for this group would rise from $11.1 billion to $37.7 billion. So I would keep Medicare at 65 for now. Congress should first guarantee affordable coverage for anyone in the gap. After that, Medicare could follow the same rule as Social Security.
Required minimum distribution age. Tax-deferred retirement accounts must start paying out at a set age. Age-based payouts entered the tax code in the 1960s. The SECURE Act raised the age from 70½ to 72 in 2019. SECURE 2.0 raised it to 73 and sets 75 for people born in 1960 or later. That took 2 bills and 3 changes. The age should follow the same two-thirds rule, starting from 75.
One safeguard for every age. No age should change fast or by surprise. Each step should be at most 2 months per birth year. Congress should announce each new age at least 10 years ahead. Denmark already gives 15 years' notice.
Counterarguments
"Congress should control wages directly." Congress would still control them. It sets the percentage and can change it by law at any time. Indexing only changes the default. Today the default is steady decline. Under this proposal the default is stability.
"Costs differ by region." They do. A federal amount is a national floor, and states can go higher. As of July 2026, 34 states and the District of Columbia set tipped cash wages above $2.13. Programs already use separate poverty guidelines for Alaska and Hawaii. The national payroll service would make regional medians possible where Congress wants them.
"The transition would be abrupt." It need not be. Congress could phase each new formula in over 3 to 5 years. Where a formula gives less than current law, the current amount stays until the formula passes it. No one would face a sudden cut.
"Income falls in recessions, so thresholds would fall." This is a fair concern. The average wage index fell from $41,334.97 in 2008 to $40,711.61 in 2009. The fix is a no-decrease rule. Each amount can rise or stay flat, but not fall. A 3-year average would also smooth sharp swings.
"Income data arrives late." Today it does. As of September 2026, the latest wage index is for 2024, and SSA has not yet posted the 2024 median. A lagged or smoothed value works in the meantime, as Social Security already shows. The national payroll service would cut the lag to weeks.
"An average rises with top incomes." That is why I prefer medians. SSA already publishes a median wage from W-2 records. Where the law uses an average, it should switch to the median when the data allows.
"Wage indexing costs money." Compared with current law, tying tax thresholds to wages would reduce revenue over time. Real wages usually grow. But price indexing is itself a policy choice. It raises taxes a little each year without a vote. Congress can set rates to raise whatever revenue it wants. It should do that openly.
Conclusion
Magic numbers are a slow, quiet way to change policy. Each year that Congress does not act, benefits shrink and taxes rise. Nobody votes for the change.
Price indexing fixed part of this problem. But the CPI measures the price of a basket of goods. The law needs to know where people stand compared with everyone else. That calls for income.
Congress should pass a law that ties each of these amounts to a percentage of median income. Where a median is not yet available, the law should use the average wage and move to the median later. Every amount should carry a no-decrease rule.
Congress should also create a free national payroll service. It would give the country current, complete wage data. It would let the IRS send most wage earners a bill or a refund instead of a return to fill out.
The same idea works for ages. Retirement and distribution ages should follow life expectancy through a set rule, not a new bill each time.
Congress would still set every percentage. It would stop setting the same numbers over and over.