- indexation
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/in'dek say"sheuhn/, n. Econ.the automatic adjustment of wages, taxes, pension benefits, interest rates, etc., according to changes in the cost of living or another economic indicator, esp. to compensate for inflation.[INDEX + -ATION]
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Comparison of price levels over time.In fiscal policy, indexation is used as a means of offsetting the effect of inflation or deflation on social security payments and taxes by measuring the real value of money from a fixed point of reference, usually a price index. Without indexing, recipients of social security benefits, for example, would suffer during times of inflation if their benefits remained at a fixed rate. Indexation is used in some countries to offset "bracket creep," which occurs in any progressive tax system when inflation pushes taxpayers into higher tax brackets. Indexation may also refer to the linking of wage rates and financial instruments to a price index.* * *
in fiscal policy, a means of offsetting the effect of inflation or deflation on social security payments and taxes by measuring the “real value” of money from a fixed point of reference, usually a price index. Without indexing, recipients of social security benefits, for example, would suffer during times of inflation if their benefits remained at a fixed rate. Indexation in this case would also apply to taxes levied to support the program. Indexation is used in some countries to offset “bracket creep,” which occurs in any progressive tax (q.v.) system when inflation pushes taxpayers into higher income tax brackets. Indexation may also refer to the linking of wage rates and financial instruments to a price index.* * *
Universalium. 2010.
