Full-Scale Looting, The Capital Gains Tax Edition

If a Democrat ever takes back the White House, she will have to make sure the copper pipes weren’t ripped out and hocked (boldface mine):

The Trump administration is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives.

Steven Mnuchin, the Treasury secretary, said in an interview on the sidelines of the Group of 20 summit meeting in Argentina this month that his department was studying whether it could use its regulatory powers to allow Americans to account for inflation in determining capital gains tax liabilities. The Treasury Department could change the definition of “cost” for calculating capital gains, allowing taxpayers to adjust the initial value of an asset, such as a home or a share of stock, for inflation when it sells

Currently, capital gains taxes are determined by subtracting the original price of an asset from the price at which it was sold and taxing the difference, usually at 20 percent. If a high earner spent $100,000 on stock in 1980, then sold it for $1 million today, she would owe taxes on $900,000. But if her original purchase price was adjusted for inflation, it would be about $300,000, reducing her taxable “gain” to $700,000. That would save the investor $40,000

Capital gains taxes are overwhelmingly paid by high earners, and they were untouched in the $1.5 trillion tax law that Mr. Trump signed last year. Independent analyses suggest that more than 97 percent of the benefits of indexing capital gains for inflation would go to the top 10 percent of income earners in America. Nearly two-thirds of the benefits would go to the super wealthy — the top 0.1 percent of American income earners

According to the budget model used by the University of Pennsylvania’s Wharton School of Business, indexing capital gains to inflation would reduce government revenues by $102 billion over a decade, with 86 percent of the benefits going to the top 1 percent. A July report from the Congressional Research Service said that the additional debt incurred by indexing capital gains to inflation would most likely offset any stimulus that the smaller tax burden provided to the economy.

Of course the Trump administration would propose this–that goes without saying. But in an uncharacteristic attempt to turn a frown upside down, there are several upsides from this:

  1. If any Democrats actually support this, we will know who they are. Always nice to flush out the corporate Dems. Really, there’s no reason why even the conservative, corporate Democrats should support this on policy grounds.
  2. Every time Republicans cut taxes without associated spending cuts, from a political perspective, this gives Democrats more room to deficit spend on nice things for all of us by revoking the tax cut (though it remains to be seen if they truly would, or instead, prattle on about fiscal responsibility).
  3. It gives Democrats to talk about another tax cut for the rich. That won’t persuade Trump supporters (nothing really will at this point), but it is one more rallying cry for Democratic voters.

Keep in mind, this is just a proposal. No idea if it will come to fruition, or if it could withstand a court challenge. Still, it tells us who the Republican Party is circa 2018, and it’s pretty fucking greedy.

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1 Response to Full-Scale Looting, The Capital Gains Tax Edition

  1. The purpose of capital gains was to account for inflation in the value of hard infrastructure and inventories, not soft fiscal assets. Allowing for adjusting initial value to inflated value would make capital gains moot, or create double dipping. It was absurd to allow it to be applied to capital investments in the first place as all such investments are anchored in Treasury bonds, which are also inflation mitigation. Trump’s cabinet picks continually display their lack of fundamental knowledge in the departments they were chosen for, or they simply assume that the econ illiteracy of the American voting populace will shield them from ridicule.

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