Currently the Trump Administration is drafting a plan to cut capital gains taxes by $100 billion over a ten year period, using inflation as the reason behind the major tax break.
The administrations Treasury Secretary, Steve Mnuchin, said in an interview following the Group 20 Summit in Argentina earlier this month that his department was currently focusing on whether it could issue regulations on its own- this means without taking the matter in front of congress. These regulations would enable Americans to account for inflation when determining capital gains liabilities, the New York Times reported.
This would mean the Treasury could redefine “cost” for calculating capital gains, ultimately allowing taxpayers to adjust the initial value of the asset, such as a home or a share of stock, for inflation when they are planning on selling.
“If it can’t get it done through a legislation process, we will look to what tools at Treasury we have to do it on our own and we’ll consider that,” Mnuchin told the Times, also stating he was sure that his department had the authority to act alone.
“We are studying this internally, and we are also studying the economic costs and the impact on growth.”
The way capital gains taxes are determined is by subtracting the original price of an asset from the price at which it was sold, and taxing the difference at around 20 percent.
For example, if someone bought a stock in 1980 for $100,000 and sold it today for $1 million dollars, he or she would owe the government $900,000 on taxes.
However, if the original price was adjusted to incorporate inflation, it would then be about $300,000, reducing the buyers capital gains to $700,000 and saving the invesor $40,000.
This move would most definitely be challenged in court by Democrats, arguing that the current GOP cares only for making the rich richer, and in this particular case, I don’t necessarily disagree with this viewpoint. Inflation affects everyone, and the people hit hardest are groups like the elderly, minimum wage workers, low income families, vets and many others American citizens that are not getting any breaks to help them deal with the ever growing costs of inflation.
A similar move was made in 1992 during President George H.W. Bush’s administration, and they ultimately came to the conclusion that Treasury didn’t have the power to make the change unilaterally.
“At a time when the deficit is out of control, wages are flat and teh wealthiest are doing better than ever, to give the top 1 percent another advantage is an outrage and shows the Republicans’ true colors,” Sen. Chuck Schumer told the Times in response. “Furthermore, Mr. Mnuchin thinks he can do it on his own, but everyone knows this must be done by legislation.”
The majority of capital gains taxes are virtually paid by the most wealthy Americans, and they were left unchanged in the $1.5 trillion tax law that Trump signed last year.
Meanwhile, Liberal economists all said they see little benefit in this tax break beyond yet another give away to the ultra rich.
“It would just be a very generous addition to the tax cuts they’ve already handed to the very wealthy,” Alexandra Thronton, senior director of tax policy at the liberal Center for American Progress told the Times.
But some Republicans remain extremely excited about this prospect, believing this change would produce a windfall for the government through a stock sales boom.
“I think we ought to look at not penalizing Americans for inflation,” said Rep. Kevin Brady of Texas, the Republican chairman of the Ways and Means Committee.
Yes, I believe we shouldn’t penalize Americans for inflation. Does that mean we will see a rise in the amount paid out to the elderly in social security to help them deal with the rising inflation prices? Or is that not possible because the government has stuck their hand in that honeypot one too many times? Will Social Security even be available for me when I retire? It seems when we speak about not penalizing American’s for inflation, what the Republicans mean is American’s with money. If we want to help American citizens deal with the ever rising prices of inflation, then it should apply to everyone, especially the ones affected the most. And I am by no means a liberal, however, I still don’t think the ultra rich are the American citizens that need the governments assistance in order to manage to survive inflation.