Some numbers never move. Not because they shouldn’t. Because Congress never bothered. The U.S. tax code is riddled with thresholds that were set decades ago and never indexed to inflation. They sit frozen in time while the cost of everything else climbs. The result is a quiet tax hike that hits middle-income Americans hardest.
Start with the capital loss deduction. If you sell a stock at a loss, you can deduct up to $3,000 per year against ordinary income. That cap was set in 1978. It has not changed in 47 years. If it had been indexed to inflation, it would be $15,430 in 2025. The IRS adjusts dozens of other figures annually. This one stays locked.
The dependent care credit is another relic. It was capped at $3,000 in 1976. That was the year Apple was founded. That was the year gas was 59 cents a gallon. In today’s dollars, the cap should be $17,345. But it’s still $3,000. That means families paying $15,000 a year for daycare get the same credit as families paying $3,000. The math is broken. The policy is stale.
Social Security income thresholds tell the same story. Benefits start getting taxed when your income hits $25,000 if you’re single or $32,000 if you’re married. Those numbers were set in 1984. They’ve never been adjusted. If they had kept pace with inflation, the thresholds would be $78,000 and $100,000 today. Instead, more retirees get taxed every year. Not because they’re richer. Because the brackets are frozen.
Congress adjusts other parts of the tax code every year. The standard deduction. The income tax brackets. The earned income credit. All indexed. All updated. But these three items like capital losses, dependent care, and Social Security income are stuck. Not by accident. By design. They require legislation to change. And no one wants to touch them.
The House Republican tax bill introduced in May 2025 does not fix this. It extends the Trump-era tax cuts. It adjusts some brackets. It adds a bonus to the standard deduction. But it leaves the $3,000 caps untouched. It leaves the Social Security thresholds frozen. The bill adds $3.8 trillion to the deficit over ten years. But it doesn’t spend a dime updating these numbers.
The result is a tax code that punishes inflation. Not just through higher prices. Through outdated limits that quietly squeeze taxpayers. The fix is simple. Index everything. Tie it to CPI. Let the numbers move with the economy. No more legislative bottlenecks. No more frozen thresholds. Just math that keeps up.
Sources
https://bipartisanpolicy.org/explainer/whats-in-the-2025-house-republican-tax-bill/
https://www.congress.gov/bill/119th-congress/house-bill/1/all-info