The Tax Foundation has published Countdown to Tax Reform, Part VI: Cost of Living and Tax Burdens as part of a series in anticipation of the expected November 1 release of the report of the President’s Advisory Panel on Federal Tax Reform. Here is a taste:

To demonstrate how cost of living can affect a family’s tax liability, Tax Foundation economists adjusted the income of a median, dual-income childless married couple to various cities using the ACCRA cost of living index, one of the nation’s leading providers of cost-of-living data. In 2004, the typical dual-income childless couple in America earned $74,443—an income large enough to put them into the top 20% of taxpayers, with a tax liability of roughly $8,081 and an effective federal income tax rate of 10.4%. As it happens, the city with the closest average income to the national average is Milwaukee, Wisconsin:

Metro Area	Income Needed	Taxpayer Group	Tax Liability	Tax Rate
Houston	$67,315	Top 25%	$6,999	10.4%
Milwaukee	$74,443	Top 20%	$8,081	10.9%
Orange County	$100,079	Top 10%	$14,506	14.5%
San Francisco	$135,003	Top 5%	$23,250	17.2%
New York City	$162,974	Top 3%	$31,139	19.1%

("Income Needed" = income needed to buy median standard of living)

While the tax code was indexed for inflation in 1985 to protect Americans from “bracket creep,” nothing has been done to protect them from “cost of living creep.”

For prior TaxProf Blog coverage of other pieces in the series, see:

• Countdown to Tax Reform:  Ten Core Principles of Tax Policy
• Countdown to Tax Reform I:  Not Your Father’s Middle Class
• Countdown to Tax Reform II:  Taxpayers and Non-Payers
• Countdown to Tax Reform III:  Who Payns Income Tax in America?
• Countdown to Tax Reform IV:  Life Cycle and Income Inequality
• Countdown to Tax Reform V:  High-Income Taxpayers and the Entrepreneurial Class