Home > posts > Even Leftist Economist and Clinton Administration Adviser Admits Need to Index Capital Gains Taxes for Inflation
August 2nd, 2018 12:48 pm
Even Leftist Economist and Clinton Administration Adviser Admits Need to Index Capital Gains Taxes for Inflation
Posted by Timothy Lee Print

The Trump Administration is contemplating a move to improve the way the federal government taxes capital gains by indexing rates for inflation, which amounts to a de facto tax cut.

It’s a no-brainer in terms of fairness and efficiency, as illustrated by the fact that even leftist economist and former Clinton Administration adviser Alan Blinder acknowledges the need for it today in The Wall Street Journal:

Why index gains?  Suppose you own a stock for many years, during which time overall prices have doubled because of inflation.  Over the holding period, the value of your stock has also doubled.  When you sell, the proceeds have precisely the same purchasing power as the original purchase.   There’s no gain, no loss.  But under current tax law, you owe taxes on the phantom ‘gain.’   Worse, if your stock went up by less than the cumulative inflation, you’ll still get taxed despite your loss.  This is unfair and dysfunctional.”

We’ll admit that it’s amusing to see a man who played the role of cheerleader for Barack Obama, who openly circumvented the Constitution and legislative process using his “pen and phone” to enact policy, demand that Trump refrain from making the change and instead allow Congress to act.  Nevertheless, we’ll gladly celebrate his support for the underlying need for change.

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