How does indexing work?
Indexing is a way to remove the effects of inflation when calculating benefits for special groups, or when measuring real results from an investment.
For example, benefits for both Social Security recipients and military retirees are indexed to the Consumer Price Index (CPI).
By using indexing to compute the real rate of return, some tax reformers suggest that home owners will not be penalized when selling homes that have appreciated solely because of inflation. Others recommend that indexing be used to calculate capital gains for all investments.
Indexing is a way to remove the effects of inflation when calculating benefits for special groups, or when measuring real results from an investment.
For example, benefits for both Social Security recipients and military retirees are indexed to the Consumer Price Index (CPI).
By using indexing to compute the real rate of return, some tax reformers suggest that home owners will not be penalized when selling homes that have appreciated solely because of inflation. Others recommend that indexing be used to calculate capital gains for all investments.
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