At issue is a priority of conservatives to reduce the amount that people pay in capital gains taxes by indexing capital gains to inflation. Republicans see this action as a way to build off the tax-cut law that Trump signed last year, and say it would boost the economy by increasing incentives for taxpayers to make new investments.This is outrageously regressive Donald Trump’s own alma mater at Penn Wharton said earlier this year that this backdoor $10 billion-a-year tax cut would give almost all of its benefits to the super-rich.
Under current law, people pay capital gains taxes on the difference between the amount for which they purchased an investment and the amount they sold it for. But conservatives instead want people to pay capital gains taxes only on the difference between the cost of purchasing the investment plus inflation and the amount for which the investment was sold.
Legislation to index capital gains to inflation has been introduced by Rep. Devin Nunes (R-Calif.) and Sen. Ted Cruz (R-Texas). There has been some interest in including the tax cut in a second package of tax cuts that the House plans to vote on this fall. However, it was not included in a "Tax Cuts 2.0" outline House Ways and Means Committee Chairman Kevin Brady (R-Texas) released last week.
Share of tax cut from indexing capital gains cost to inflation
Top 1% of earners- 86%
Top 5% of earners- 95%
Other 95% of Americans- 5%
Let me also remind you that capital gains already gives a large tax cut to the rich under our current tax system. As this handy chart from Putnam Investments explains, the top marginal rate for capital gains is at 23.8%, well below the (newly-reduced) top marginal tax rate of 37%. So on top of that tax break, the Trump Administration and some GOP members of Congress now want to have less of those gains be taxed.
This would give a double benefit to stockholders and others who
Permanent avatar of the GOP Tax Scam
In addition to the absurdity of the proposed regressive tax cut, Treasury Secretary Steve Mnuchin took it to another level earlier this week by claiming that if Congress can’t push this through in their next Tax Scam, the Trump Administration might just do it themselves.
“Consider that with, obviously, other parts of Tax 2.0,” Mnuchin told the [Wall Street] Journal. “If we’re not able to complete Tax 2.0, then we’ll go back to the drawing board and decide whether we want to consider this on a nonlegislative basis.”…I’m not a lawyer, but I know damn well that you can’t change the definition of a “cost” that changes how much tax revenue comes in without a change in the law. Just….no. (And indeed, the Trump Administration was backing down on that "do it alone" plan by last night, once it became public).
Conservatives argue that Treasury has the authority to index capital gains due to a 2002 Supreme Court ruling in a telecommunications case that found that the term "cost" was ambiguous. But Democrats disagree that Treasury has the authority to index capital gains by executive action, arguing that the Supreme Court ruling had nothing to do with the tax code and noting that 1992 opinions from Treasury and the Department of Justice found that Treasury did not have the power to take the action.
Now, the Trump Admin can choose to change how they enforce the law and how often they audit people for violating the law, like how Trump’s IRS recently decided to allow political “social welfare groups” to hide the names of their donors. But there’s no change in the taxes those organizations do/do not have to pay, and they still have to file their regular tax return with the same numbers in them.
And why didn’t the Republican Congress forecfully tell the Trump Administration, “changing tax law is our duty, it’s right here in Article I, Section 8 of the Constitution that you swore to uphold. Don’t even try to change this on your own.” In addition to supporting such a regressive tax scam, the GOP Congress’s failure to assert its authority in this and numerous other areas of governance is more than enough reason to boot them out in 14 weeks.
In the great words of a Democratic Senator from the past, “WHEN DOES THE GREED STOP?”