Wednesday, August 1, 2018

Trump, GOP Congress trying to give away even more to Wall Street gamblers and super-rich

In what is becoming par for the course, the GOPs in Congress are considering yet another terrible idea to make their Tax Scam help the rich even more. That story has emerged after a New York Times report this week which indicated Trump Administration officials agree with some GOP members of Congress, and back a plan that would cut capital gains taxes in yet another way.
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.

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.
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.

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 gamble on trade assets….and leave the rest of us to pay the difference with taxes on actual work. And we also get to deal with the higher interest rates and lowered social investments that will result from the increased deficits.

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.”…

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.
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).

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?”


  1. Obviously greed is the motivator, but I think there's a conscious strategy/signal going on here. Mnuchin isn't dumb, and now has access to all sorts of formative data that doesn't all reach the public. He's operating the levers of power entirely within the context of his own portfolio.

    Mnuchin knows that massive inflation is on the way.

    Health care plans are blowing up under the piecewise dismantlement of the ACA. USBonds are being auctioned like mad to pay for the tax cuts. Real wages are already growing slower than inflation. Tariffs are self-inflicted inflation on certain sectors, and are going to metastasize to the broader economy over time. Throw in a real resource shortage (war with Iran? Drought?) and inflation will skyrocket.

    If we're just printing money, we can make the GDP growth look like anything we want, right? How about 10% GDP growth? That looks great unless you have 12% inflation.

    Hedging CapGains against inflation is the PERFECT way for the 1% to keep their wealth while inflation robs the rest of us. Social unrest as a result of inflation does not have a good history, either.

    1. Oooh, great point about how indexing would protect rich people in case of inflation and let them not have to pay anything with the great gains they've probably already gotten over the last 9 years. But it might also lead to a market crash as earnings drop.

      But then again, didn't Trump say likes it when the economy crashes because then you can buy things on the cheap? Not a bad deal, as long as the torches and pitchforks don't get to you.