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File this under 'be careful what you wish for.' The cap gains tax is currently not indexed to inflation. From the links example, say you buy $1000 in stock. Suppose that by the time you sell, there has been 2% worth of inflation, so the stock is now worth $1200. If you sell, you will be taxed on the $200 'gain,' which really is no gain at all.
There have been past efforts to do this, in particular during the H.W. Bush admin:
Quote:
“We were all set to do it in 1991, and it would have dramatically accelerated economic activity and venture capital formation,” [HW aide C. Boyden] Gray told me this week.
At the last minute, objections were raised by Justice Department lawyers who questioned if President Bush had the legal authority to reinterpret the section of the Internal Revenue Service Code covering the definition of the word “cost.”
But now we have 8 years of Obama setting much precedent of legislating from the White House, in one case (DACA) enacting an exec order that he himself had said was not constitutionally possible. It is now thought by many that an exec order to index cap gains could be made to stick.
Quote:
Kudlow...enthusiastically supports a Trump executive order on capital gains. In a TV interview Wednesday he repeated his backing for indexing capital gains without mentioning any executive order. But no one doubts that’s the direction he wants to go.
I hope he tries it. Imagine the howls from the left about this 'tax cut on the rich' being enacted without congressional approval. Be careful what you wish for.
If you're going to index capital gains to inflation, then it should be taxed at the same rate as ordinary income. The fact that they're not indexed to inflation is one of the public policy reasons often given for why capital gains are taxed at a (sometimes) lower rate than ordinary income.
Where does the president derive the authority to change the tax treatment of capital gains by executive order?
Or anyone with a retirement nest egg. But hey, nothing is better than something if that "something" would also benefit a politically disfavored demographic, amirite?
File this under 'be careful what you wish for.' The cap gains tax is currently not indexed to inflation. From the links example, say you buy $1000 in stock. Suppose that by the time you sell, there has been 2% worth of inflation, so the stock is now worth $1200. If you sell, you will be taxed on the $200 'gain,' which really is no gain at all.
In case someone out there read your numbers and got very confused. I am pretty sure you meant $20, not $200. 2% of $1,000 is $20.
At any rate, I personally have been saying capital gain should be indexed to inflation. Whether or not it should be taxed at a lower rate than income tax is a different discussion.
In case someone out there read your numbers and got very confused. I am pretty sure you meant $20, not $200. 2% of $1,000 is $20.
At any rate, I personally have been saying capital gain should be indexed to inflation. Whether or not it should be taxed at a lower rate than income tax is a different discussion.
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You're right, and thanks for the correction.
BTW, a parallel case can be made regarding regulation. Under Pres. Obama, the practice of 'legislation by regulation' became rampant. In Obamacare, for example, there were over 300 instances where decisions about the law were left in the hands of the HHS Secretary: https://spectator.org/39516_empress-obamacare/
But what is done by regulation by one admin, can be undone by the next one--no involvement of congress required. I heard the EPA head Pruitt interviewed recently. He seems to be going for some pretty dramatic changes, all by regulation/de-regulation.
Liberal law prof and writer Jonathan Turley said that Obama created the imperial presidency that Nixon had dreamed of. What Obama did not count on was that he would be passing that baton to Donald Trump.
If you're going to index capital gains to inflation, then it should be taxed at the same rate as ordinary income. The fact that they're not indexed to inflation is one of the public policy reasons often given for why capital gains are taxed at a (sometimes) lower rate than ordinary income.
Where does the president derive the authority to change the tax treatment of capital gains by executive order?
I have heard many an economist argue that the cap gains tax rate should be zero. As JFK put it, 'a rising tide lifts all boats.' A cap gains tax of zero would make for an investment boom, which would make for an economic boom--a rising tide.
At one time the zero cap gains tax was an article of faith among economists. This may be no longer the case, but it is still a widely held view. https://www.economist.com/node/21554181
Sadly the same people for this are among those who were good with someone saving their money but having it worth less down the road to prop up the failures of Wall Street.
Just more for show actions from a reality television president
Well President Obama did it, and was upheld by the courts--see King v Burwell. The IRS chose to ignore explicit language in Obamacare that was found to be inconvenient after it had been signed into law. The court said, sure, the IRS can do that.
edit--it was not specifically by exec order, but it was by executive fiat, so in essence the same thing.
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