Taxes

Republicans Demand Another Tax Cut For Rich Shareholders

JM Ashby
Written by JM Ashby

The package of tax cuts Republicans passed in December of 2017 overwhelmingly benefited the richest people in the world; corporate executives and other wealthy individuals who own large amounts of stock. Corporations took their trillion dollars in tax cuts and funneled it into a trillion dollars in stock buybacks and dividend payments. They didn't use their tax cuts to raise wages or make new investments beyond what they would have made in any case.

The corporate world's response to having their taxes cut was entirely predictable, and not just because they said they were going to spend their windfall on buybacks before Republicans handed it to them. Those kinds of decisions are made by executives and executives answer to shareholders. Executives themselves are also shareholders and usually the biggest ones. Compensating executives through stock encourages executives them to increase the value of their own stock. It's a feedback loop.

But with all of that said, $1.5 trillion in tax cuts apparently weren't enough for Republicans who are asking Treasury Secretary Steve Mnuchin to unilaterally cut taxes for the richest people in the world who've already recieved tax cuts they don't need.

A group of 20 GOP senators led by Ted Cruz have signed a letter asking Mnuchin to bypass Congress and index taxes on capital gains so rich shareholders will owe less in taxes on their gains.

Cruz, along with 20 other Senate Republicans, are sending a letter to Mnuchin on Monday urging him to index the tax on gains made from real estate, stocks or bonds so investors would pay less when selling an asset than they would under existing law.

Current “treatment punishes taxpayers for the mere existence of inflation and is inherently unfair,” the letter said. “Other tax provisions such as individual tax brackets are rightly adjusted for inflation annually. Capital gains ought to receive the same treatment.”

If it's not clear what Republicans are asking for -- they're asking Mnuchin to unilaterally change existing law so that shareholders would only owe taxes on the original value of their assets rather than what those assets are worth today.

So, if someone bought shares of Disney 10 years ago, they would only owe taxes on the original value of those stocks rather what it's worth now that Disney has assembled its own Infinity Gauntlet by spawning the Marvel cinematic universe and by acquiring Lucasfilm and 21st Century Fox.

This would amount to a $100 billion tax cut that would benefit people who already the richest people in the world.

That would amount to a tax cut worth more than $100 billion over a decade, according to the Penn Wharton Budget Model. About 95% of the benefit from indexing capital gains to inflation would accrue to the top 5% of taxpayers, according to the analysis.

  • Draxiar

    Greed has no bounds unless they are set.

  • muselet

    This idea has been floated before, and it has sunk without a trace. Enough members of Congress, even the Rs, could do basic arithmetic with sufficient skill to realize that indexing capital gains is lunacy.

    Leave it to the current crop of Rs to embrace the lunacy.

    I put the odds of Steve Mnuchin taking the letter seriously and undercutting Congress’s explicit authority to set taxes at no worse than 50:50.

    –alopecia

  • Dread_Pirate_Mathius

    YEAH!! The current tax law punishes stock holders for the existence of inflation.

    But god forbid we should raise the minimum wage in line with inflation.