How Many Tax Cuts Do Millionaires Need?
In Trump’s latest efforts to enrich wealthy people like himself, his administration recently proposed indexing the capital gains tax rate to inflation. This change would give billions of dollars in tax cuts to wealthy investors, while giving no relief at all to the working class.
Right now, the capital gains tax is one of the only safeguards against the upper class’s unprecedented accumulation of wealth, and weakening this already inadequate tax will lead to huge gains for the rich. It taxes profits by taking the sale price of an asset, let’s say a house, and subtracting the original price paid for the house, then taxing the difference between those numbers. Let’s say the house cost $50,000 when it was purchased in 1990, and is now worth $100,000. Currently, the taxpayer would have to pay taxes on the $50,000 difference. The proposed change would bring up the original cost in line with using inflation. Let’s say in 2018, the $50,000 original purchasing price is equivalent to $75,000 today. That means only $25,000 from the sale of the asset would be taxable. By allowing inflation to increase the original cost basis, the rule change would artificially lower the capital gain on the asset, thereby lowering the tax due.
There is already a clear bias within our tax code that gives investors perks over the working class, even without this change. The capital gains tax rate on assets held for more than a year ranges from 0%-20%, while taxpayers who work for their money have tax rates ranging from 10%-37%. So at the low end of the income spectrum, an unmarried investor who sells an asset and makes a profit of $38,000 pays no taxes on the sale. An unmarried teacher who makes $38,000 pays 12% come Tax Day. At the high end, an investor earning a million dollars a year pays a lower marginal tax rate than a married couple earning $80,000 a year.
With so many other pressing issues facing our country, it should worry everyone that Trump and his administration are so preoccupied with further lowering taxes for the rich. And this move would almost exclusively help the rich. 95% of the gains of indexing capital gains would go to the top 5% of earners, and a whopping 63% of the benefit would go to the top 0.1%.
Not to mention that the rich already got a huge tax break less than a year ago. This proposal is a $100 billion giveaway to the uber rich who qualify for the capital gains tax, and it’s coming less than a year after last December’s $1.5 trillion tax cut for millionaires and wealthy corporations, a tax cut that did almost nothing to help American workers.. Analysis of all Fortune 500 companies has revealed only 4.3% of workers will receive a one-time bonus or wage increase from the business tax cuts. Businesses received nine times more in cuts than what they have passed on to workers.
Not only is this tax cut going to enrich the people who need it least, but the revenue loss from it will probably be used to justify budget cuts that also hurt the working class. The Congressional Budget Office is already projecting a $139 billion increase in the deficit this fiscal year. Further tax cuts that would “primarily benefit high-income taxpayers” will result in demands for spending cuts elsewhere, meaning Pell Grants, Medicare and Medicaid, and affordable housing are just a few of the programs that won’t be safe.
This latest proposed swindle is more of the same grifting this administration is so keen on. At some point, it has to end. This November, we need to elect politicians who do not act out of self-interest, but who support a fairer tax code-- one where stock traders do not get special treatment at the expense of blue collar workers.
Morris Pearl currently serves as Chair of the Patriotic Millionaires, a group of hundreds of high-net-worth Americans who are committed to making all Americans, including themselves, better off by building a more prosperous, stable, and inclusive nation. The group focuses on promoting public policy solutions that encourage political equality, guarantee a sustaining wage for working Americans, and ensure that millionaires, billionaires, and corporations pay their fair share of taxes. Previously, Mr. Pearl was a managing director at BlackRock, one of the largest investment firms in the world.