Send a Tweet
Most Popular Choices
Share on Facebook 4 Share on Twitter 3 Share on LinkedIn Share on Reddit Tell A Friend Printer Friendly Page Save As Favorite View Favorites
OpEdNews Op Eds

The Trump Administration's Giant F**k You to Working People: Playing Games with Capital Gains Tax Rates

By       Message Dean Baker       (Page 1 of 1 pages)     Permalink    (# of views)   No comments

Related Topic(s): ; ; ; , Add Tags
Add to My Group(s)

View Ratings | Rate It

opednews.com Headlined to H3 8/4/18

Author 2529
Become a Fan
  (40 fans)

From Common Dreams

- Advertisement -

As the Republican motto goes, "tax cuts are for rich people."


A snarky sign seen in San Francisco.
(Image by (Photo: Steve Rhodes/flickr/cc))
  Permission   Details   DMCA

- Advertisement -

Okay, I'm going to plead guilty to playing lawyer without a license. The NYT reports that the Trump administration is proposing to unilaterally (as in no congressional action) change the way that capital gains are calculated for tax purposes.

The plan is to allow people to index capital gains for inflation. For example, under current law, if you bought 100 shares of stock for $100 per share 10 years ago, and sell the shares today for $200, you would pay the capital gains tax on the full difference of $10,000. (100* $200 = $20,000, 100* $100 = $10,000. $20,000 minus $10,000 = $10,000)

Under the Trump administration's plan, you would be able to adjust the original $10,000 purchase for the inflation in the last decade. Let's say that the inflation over this period has been a total of 20 percent. This means that instead of deducting $10,000 from the current sale price to calculation your gain you would deduct $12,000. This would leave a taxable gain of $8,000 instead of $10,000.

- Advertisement -

In this case it means a 20 percent reduction in the tax rate on capital gains. The reduction would be greater for longer held assets and less for assets held a short period of time.

In case there is any doubt, almost all of the savings would go to rich people. The article cites an analysis showing that 97 percent of the savings would go to the top 10 percent of the population and more than two thirds would go to the richest 0.1 percent.

And, just to be clear, don't be foolish enough to think this is about helping the middle class Joe and Jane with their 401(k)s. These suckers have the capital gains in their 401(k)s taxed as ordinary income. They won't be helped one iota by this change in the tax law. As the Republican motto goes, "tax cuts are for rich people."

Now for my cheap legal thoughts. Congress has repeatedly changed the tax code with the understanding that a capital gain was defined as the difference between the selling price of an asset and the purchase price. This is one reason why the tax rate on capital gains is so much lower than the tax rate on wage income. (The top tax rate on capital gains is 20 percent, compared to 37.0 percent on wage income.)

In effect, the Trump administration would be saying that Congress didn't know what it was doing when it was setting capital gains tax rates. That they actually meant for the gains to be indexed to inflation, it was just some weird misunderstanding that persisted for all these decades that caused capital gains to be measured by just taking actual purchase price.

I suppose this would be surprising, but given the open contempt that the Trump administration routinely shows for the rule of law, inventing a huge tax break for the richest people in the country is pretty much what we have come to expect. After all, if they didn't get to lie, cheat, and steal, how could rich people get by on today's rapidly changing economy?

- Advertisement -

This work is licensed under a Creative Commons Attribution 4.0 International License

 

- Advertisement -

View Ratings | Rate It

opednews.com

Dr. Dean Baker is a macroeconomist and Co-Director of the Center for Economic and Policy Research in Washington, D.C. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. (more...)
 

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon Share Author on Social Media   Go To Commenting

The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

The Federal Reserve Board and the Presidential Candidates

The Deficit Hawks Target Nurses and Firefighters

The Attack of the Real Black Helicopter Gang: The IMF Is Coming for Your Social Security

The profit on the TARP and Bernie Madoff

Poverty: The New Growth Industry in America

The Real Reason For The Government Shutdown