Taxes

Report: Trump Wants a Unilateral Tax Cut for the Ultra Rich

JM Ashby
Written by JM Ashby

As much as they would have liked to, Congressional Republicans failed to cut taxes on capital gains when they passed their tax cuts for corporations, but the Trump regime is considering a unilateral tax cut for some of the richest people in the world.

Treasury Secretary Steve Mnuchin is exploring whether his office can bypass Congress and unilaterally cut taxes by allowing filers to adjust for inflation.

The Treasury Department could change the definition of “cost” for calculating capital gains, allowing taxpayers to adjust the initial value of an asset, such as a home or a share of stock, for inflation when it sells.

“If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that,” Mr. Mnuchin said, emphasizing that he had not concluded whether the Treasury Department had the authority to act alone. [...]

Currently, capital gains taxes are determined by subtracting the original price of an asset from the price at which it was sold and taxing the difference, usually at 20 percent. If a high earner spent $100,000 on stock in 1980, then sold it for $1 million today, she would owe taxes on $900,000. But if her original purchase price was adjusted for inflation, it would be about $300,000, reducing her taxable “gain” to $700,000. That would save the investor $40,000.

This is obviously heinous even at face value, but it's even worse when you look at the bigger picture and consider exactly who this tax cut would be afforded to.

The New York Times' example of an investor who bought stock many years ago and sold it off today is an appropriate example. We've spent months discussing out the GOP's tax cuts have gone directly into the pockets of executives and wealthy shareholders in the form of corporate buybacks and dividend payments.

A unilateral tax cut on capital gains would be another tax cut on top of their previous tax cut. Executives and shareholders could pay less taxes on the earnings provided to them by the corporate tax cuts passed by Republicans just 8 months ago.

According to Trump's Alma mater, the Wharton School of Business, this unilateral tax cut would cost over $100 billion.

  • muselet

    Kevin Drum yesterday:

    The … law doesn’t care about inflation. The base price of the stock is whatever you paid for it in dollars at the time, and the selling price is whatever you sold it for later. The difference is your profit, full stop. Congress has had dozens of chances to change this, but it gets complicated once you dive into it. So they’ve always left it alone and made up for the implicit inflation penalty it by making the capital gains rate pretty low.

    […]

    The good news is that Trump and his wealthy real-estate pals almost certainly can’t do this. The law is simply too clear on this point. Still, at least it shows that their hearts are in the right place, doesn’t it?

    And if they do somehow get away with it, there’s still a silver lining. Now that they’ve gotten religion on inflation, it means that in the interests of fairness they’ll surely be in favor of indexing things like the minimum wage to inflation too. Right? I mean, what possible reason could there be for indexing the wages of the rich to inflation but not the wages of the poor?

    Don’t you just love a pundit with a sense of humor like that?

    –alopecia

  • ninjaf

    It wasn’t enough to smash open the piggy bank that is the American Treasury. They’re now going back and checking all of the broken shards to make sure that they didn’t leave anything behind, hidden under the broken pieces of what used to be our country.

    • Excellent metaphor! If they keep this kind of crap up they’ll be literal scavengers picking through our financial corpse.

      • ninjaf

        Thanks!

  • katanahamon

    It’s too bad rank and file Republicans are too stupid to see how this damages the 99 percent who don’t receive the tax cuts. Oh well, again, no surprise here. They’re going to “make hay while the sun shines.”