August 6, 2018

Indexing Capital Gains

.” (Reuters)

Both the left and the right believe that any changes should go through Congress.

See past issues

The left has concerns that these tax cuts will only benefit the wealthy.

The right generally supports indexing capital gains to inflation, provided it is done by Congress.

“All told, 86.1 percent of the tax cut, or more than $80 billion, would be captured by the top 1 percent of earners, with the next 4 percent of earners receiving 9 percent of the cut. The remaining 5 percent of the cut would be distributed among the bottom 95 percent of the population.”

Washington Post

Senator Elizabeth Warren tweeted, “DC works great if you’re rich & powerful. How about a gov't that works for everyone?”

Twitter

“Were it feasible, it would make sense to measure all income and expense in real terms since capital gains, like all forms of capital income, partly represent inflation. But indexing only capital gains make no sense. It could cut capital gains taxes by up to $20 billion a year—nearly all for the richest Americans—and open the door to a raft of new, inefficient tax shelters.”

Tax Policy Center

The right generally supports indexing capital gains to inflation, provided it is done by Congress.

Some dispute the analyses suggesting that this would primarily benefit the wealthy: “No model can estimate how much revenue might be lost by indexing

if any

because that depends on such unknowable things as future asset values, future tax laws and future inflation...

"The people who are

Cato Institute

Dated but relevant: “Taxing inflationary gains makes little sense. It causes effective tax rates to rise when inflation does. And it means that two people who make the same real gain on their investments pay different effective tax rates if one of them holds his investments in a higher-inflation period than the other.”

Bloomberg

On the bright side...

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