Posted on 08/01/2018 9:00:31 AM PDT by SeekAndFind
A few months before he became President Trump's top economic advisor, Larry Kudlow wrote a column urging Trump to index capital gains taxes to inflation. Thankfully, the Trump administration appears to be listening. Not only would indexing fix a glaring problem in the tax code, it would add still more juice to the economy.
In a column published by IBD last August, Kudlow called the lack of inflation adjustment for capital gains taxes "an unfair and misguided policy that punishes risk and success." He said Trump "should use his executive authority as he so often has to drain the swamp to remove this prosperity-killing practice."
Right on all counts.
First, consider the fairness argument. One of the most important tax reforms enacted by President Reagan in the early 1980s was to index income tax brackets to inflation. Before that, families whose incomes just kept pace with inflation would get pushed into higher and higher tax brackets. Indexing tax brackets to inflation ended this unfair, and hidden, tax.
But capital gains still suffer from lack of indexing. Let's say an investor bought $1,000 worth of a company's stock in 2000. Today, it's valued at $1,500. If he sold the stock, he'd face up to a 23.8% capital gains tax on the $500 gain. (That's not counting any state-imposed capital gains taxes.)
But in real terms, his investment has gained only $7. So, his effective capital gains tax rate is 139%. If the gains were indexed to inflation, his tax bill would be $1.67 instead of $119.
The longer the investment, the worse this inflation tax get. The effective tax rate, in fact, can be infinite, if the inflation-adjusted "gains" turn out to be losses.
(Excerpt) Read more at investors.com ...
The Tax Foundation ran the numbers a few years ago and found that the average effective tax rate on real, inflation-adjusted capital gains is 42.5% or nearly double the current advertised top rate.
There’s no question that this unfair tax needlessly distorts the economy. One obvious impact is that it locks up too much capital. Who wants to sell stock at a loss and then pay a huge tax bill?
At the same time, it discourages long-term investing because the tax rate on those gains will be higher.
They also need to do something about that AMT. It was devised at a time where if you made $100k a year you were rich. In some areas that’s not enough to afford your own home now.
It should have been tied to inflation decades ago.
Great. Make rich people richer.../s
I agree the tax is not fair, however, they should shut down talk of this issue until after the election and instead talk about making the middle class tax cuts permanent. if they talk about more tax cuts going the “rich” that plays perfectly into the Dems and media talking points that the previous tax cuts were just for the wealthy.
Straight up buys of stock later sold before the traditional long term capital gains time period can be taxed at the long term rate even if sold prior to the long term time period.
Encourage investment in companies, not investment in the Stock Market Casino.
Exactly!
This really effects retirees who bought into the Ted Kennedy 401-K trap. Who are forced to are forced to divest a certain percentage of their investments (3.5%) each year.
They also need to do something about that AMT. It was devised at a time where if you made $100k a year you were rich. In some areas thats not enough to afford your own home now.
...
For some, it’s not enough to afford the property taxes.
It’s a form of legalized extortion imho.. beating up on people who invest and then seek to reap rewards..
Why should it get swallowed by a behemoth of a gubamint on steroids, and then be told you are evil becuz you actually thought you deserved the benefit of the profits more than the gubamint and had better uses for it.
If anything, a 5% or 10% max tax should apply.. or less.
And 60 votes in the Senate to pass. Good luck.
True that!
Interesting that in my view what the Left is proposing is actually referred to in the Bible as “coveting”, i.e. desiring and conspiring to take away the fruits of ones labor.
Of course all the nonsense spouted is they are doing it “for the children” or some other garbage, what they are really saying is we want your prosperity so we can enslave others with it and buy votes and allegiance. They are Straight Trippin Boo now because there are plenty of jobs and the “slaves” are leaving the plantation and takin care of business without the chains
Oh well, sucks to be You Democraps!
And by the way, as Jim Robinson named this site correctly We Are A Free Republic form of government under a Constitution, every Democracy ever formed has failed!
The FreeRepublic Rules!
Sic Semper Tyrranis!!
It's questionable whether Trump can do this through executive action. If he tried there would certainly be a court challenge and a riot in Congress. Not something you would want just before the midterms.
If it's at zero then why are you indexing it?
I detect no subtlety in you.
Trump also needs to drop the coming Electronic Logging Devices which Obama wants to put into every horse owner’s truck and every 4-H member’s vehicle.
Totally unfair.
First, consider the fairness argument. One of the most important tax reforms enacted by President Reagan in the early 1980s was to index income tax brackets to inflation. Before that, families whose incomes just kept pace with inflation would get pushed into higher and higher tax brackets. Indexing tax brackets to inflation ended this unfair, and hidden, tax. But capital gains still suffer from lack of indexing.
Either that, President Trump, or paint racist slogans on your willie and upload a willie-wavin' video to Instagram. Thanks SeekAndFind.
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