Another Trump Tax Break for the Richest Americans

By Ronald Horvath | Jul 31, 2018

White House Reportedly Considering Bypassing Congress to Grant $100 Billion Capital Gains Tax Cut for Wealthy Americans

On Monday, we got the latest example of President Trump and his rich buddies’ shamelessness in trying to enrich themselves and their golfing partners with the New York Times report that Trump’s Treasury Department is pondering ramming through a $100 billion tax cut almost exclusively to the very wealthiest in America by overhauling how the capital gains tax is calculated. To make matters even more underhanded, the White House is studying whether it can bypass Congress and make the move by executive fiat by arguing it’s a simple regulatory change rather than a legislative one.

The broad outline of the change is that the new capital gains cut would factor in inflation of any asset being sold, thereby slashing the difference—on paper—between what you bought, say, your house for and what you sold it for. That, in turn, would reduce what you pay in capital gains tax. Here’s a more detailed explanation from the Times:

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.

Unsurprisingly, the Times notes, good faith independent analyses of recalibrating the capital gains tax in this manner found that almost all of the money—more than 97 percent of the benefits—would go into the pockets the top 10 percent of income earners, 86 percent would go to the top 1 percent, and nearly nearly-two thirds of that cash would go to the top 0.1 percent. This is a move long-coveted by conservatives and, in Trump, they see their opportunity to claw back money by fiddling with the government definition of “cost” in order to include inflation, rather than the actual amount you paid for your house. It’s a move previous Republican administrations have considered and decided ran afoul of the law.

Comments (2)
Posted by: Ronald Horvath | Aug 01, 2018 15:48

"Jane Hardy, the chief executive of a company that makes lawn-care equipment, says she had to lay off 75 employees this summer because of President Trump’s trade war. ..  Small and mid-size companies are especially vulnerable to the tariffs because they are not able to absorb costs or shift production overseas as easily as larger companies. Hardy feels caught in a bind: If she raises her prices, foreign competitors will undercut her. Instead, she cut almost 40 percent of her 200-person workforce, most of whom are blue-collar production workers at the Brinly-Hardy plant in southern Indiana. It was the same tactic Mid-Continent Nail, the largest U.S. nail manufacturer, used earlier this summer when it laid off dozens of workers in Missouri because of Trump’s tariffs on Mexican steel. Mid-Continent has warned it may have to close its doors by Labor Day. "

"Trump has repeatedly said he would protect American farmers in the trade war, last week setting aside $12 billion to help them, but he is facing pressure to extend aid to other industries if the tariffs remain in place or get extended to more products.

Extending those bailouts would be an expensive proposition. The U.S. Chamber of Commerce on Monday estimated the total price tag could hit $39 billion if Trump compensated the losses across all industries. It would take $7.6 billion to help car and automobile parts manufacturers alone, the Chamber said, calling it a “slippery slope” for Trump to determine who gets help and who doesn’t. The Chamber has been a vocal critic of the tariffs.

Critics of Trump’s trade policy are calling on him to de-escalate the trade war rather than try to bail out the businesses hurt by it. But if the trade fight continues and the midterm elections draw near, the White House stands to face pressure, including from Republicans, to extend more government aid."

Posted by: Ronald Horvath | Jul 31, 2018 18:24

"The Treasury Department predicted the U.S. government’s borrowing needs in the second half of this year will jump to the most since last decade’s financial crisis as the nation’s fiscal health deteriorates despite a strong economy.

The department expects to issue $329 billion in net marketable debt from July through September, the fourth-largest total for that quarter on record and higher than the $273 billion estimated in April, Treasury said in a report Monday.

The department’s forecast for the October-December quarter is $440 billion, bringing the second-half borrowing estimate to $769 billion, the highest since $1.1 trillion in July-December 2008.

The estimates were “quite a bit higher than our expectations,” Thomas Simons, senior money-market economist at Jefferies, said in a note.”


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