Welcome To Our Four Millionth Story About Yet Another GOP Plan To Cut Taxes For The Rich
This time it's gonna make the Rona Recession go away, they say.
Republicans like to keep things simple, and are dedicated to a few bedrock principles: small government that leaves people alone unless they're women who want to have sex, a free-market economy that doesn't pick winners or losers except when they're donors, and a commitment to the sanctity of human life as long as you're only talking about fetuses. Heck, a lot of them are so dedicated to efficiency that they have only two or three jokes ("Pocahontas," "150 genders," and ... I forget the other. Oops). And when it comes to economic policy, their one fallback joke is tax cuts. But as Republicans have been proving for 40 years, there are near-infinite variations on using the tax code to help the donor class, so it remains a good racket.
In the latest variation on the theme, the White House is floating a scheme it claims will inject a big dose of prosperity into the post-rona economy: a "capital gains tax holiday," in which the tax rate on one of the chief income sources for the wealthy wouldn't simply be cut; it would be eliminated for an as-yet undefined period. And as Washington Post columnist Catherine Rampell explains , such a scheme could be even more ruinous than the average run of Republican tax cuts for the rich. At least for funding stupid stuff like having a government — it would be great for the very richest Americans. But of course, that's the point: A functional federal government is anathema to these goons.
Just a quick reminder of what "capital gains" are, for those of us whose eyes glaze over once financial stuff comes up:
A "capital gain" refers to how much the value of an asset (such as a stock) has increased over time. Taxes on capital gains are triggered only when the asset is sold. So if you bought a few shares of Apple stock when it IPO'd in 1980, your shares would be worth a fortune today — but you don't owe Uncle Sam a penny until you cash out.
A holiday on such taxes would work thusly: "For some temporary, to-be-determined length of time, rich people could sell their assets, realize whatever gains they've accumulated over the decades, and never pay taxes on the income."
Most Americans don't pay capital gains taxes, because most Americans don't trade stocks. They may pay into an IRA, but capital gains taxes aren't a concern until the plan starts paying out. Or so I hear, what even is "retirement planning"? (My eyes are now opaque.) But the very wealthy tend to get most of their income from stocks and other investments. And that's just part of why we have so much income inequality, kids — since Reagan, the system has been designed to help out the investor class above all others. As Jonathan Chait points out, this is rich-people stuff: When capital gains taxes are cut,
Three-quarters of the benefit goes to people with an annual income over a million dollars. Income from capital gains is already taxed at half the level of salary income, and a large share of capital gains is never taxed at all, due to a loophole that allows stocks to be transferred to heirs tax-free.
Not surprisingly, a "capital gains tax holiday," as promoted on CNN Sunday by Trump adviser Kevin Hassett, would benefit mostly the One Percent, who already have multiple options to avoid the taxes now. Let's let 'em grab even more money by selling off their holdings tax-free! Maybe they'll tip their waiters an extra dollar or two.
Now, the whole idea of tax cuts is that they supposedly encourage economic development: Let the investor class keep its money and it'll invest in factories and hire people. As we've seen with pretty much every Republican tax cut, and especially with the 2017 Big Fat Tax Cut for Rich Fuckwards, that simply hasn't happened . Because for fuckssake, why would a company expand its workforce if there isn't demand for its products, which tends to come from us rabble who pay rent and buy toaster ovens while wearing a mask. Instead, most of the benefits from the 2017 tax cut got plowed back into stock buybacks, which made the rich and the corporations richer, and that was the point all along.
That's the beauty of tax cuts: You can pretend that, like Patent Hydroxychloroquine, they cure everything!
[Republicans] enacted capital gains cuts as the cure for slow growth and high inflation (1978), fast growth and low inflation (1997), slow growth and low inflation (2003), and proposed more capital gains cuts on and off.
Capital gains tax cuts also keep your floors shiny and are the perfect topping for pumpkin pie.
And if the point of a tax cut is to encourage economic growth, Rampell points out, then a capital gains tax "holiday" makes even less sense, because
a one-time, temporary capital gains holiday would only reward past investment decisions. It would not actually increase incentives to make new investments. Sure, the lucky guy who bought Apple stock in 1980 can now cash out tax-free. But the policy would do little to change future investment decisions and increase capital accumulation.
But then the investors could plow the proceeds into more investments and get richer, and eventually they'll buy enough yachts that the rest of us Human Capital Stock might be able to get an extra serving of Soylent Green! Or become one.
Mind you, this wouldn't just be a big cash grab for the rich. Rampell 'splains it would also have the lovely side benefit of further breaking the machinery of government, always a worthy GOP goal:
That's because anyone with any unrealized gains today would use the holiday to sell and book those gains now, tax-free, thereby denying the government the ability to ever collect revenue on them. You can't unring the bell. Absent some sort of (possibly unconstitutional) wealth tax, the holiday would deprive the treasury of taxes on the past 50 years or so of accumulated, unrealized capital gains.
Bigger deficits, less revenue to do things like a Green New Deal or better healthcare, and more economic instability — and all for a probable incoming Democratic administration. Then in a decade or so, Republicans can run on fixing the mess they left in the first place. Bet your ass they'll suggest a tax cut.
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