What is the meaning of 'indexing' something?
From a document about 2011 taxes, I came across this line:
For 2011, the income thresholds, personal amounts, and tax reduction amounts are indexed. They have been increased based on changes in the Consumer Price Index.
What does it mean when one says : "tax reduction amounts are indexed"?
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It literally means what the second sentence says in your question:
They have been increased based on changes in the Consumer Price Index.
According to the CRA Fact sheet, all values were indexed to the consumer price index (CPI). Since the CPI increased by 1.4% in 2010, all values were adjusted 1.4% higher.
Generally speaking, an index is a point of reference.
When you index something based on the some other value, it means that you adjust it based on the that reference value.
(Another interpretation of using index as a verb could be the act of creating that reference, but that doesn't apply here.)
I think this is just a fancy way of saying that it is adjusted for inflation (based on the CPI).
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