The Trump administration's dumbest idea yet
More tax cuts for the super-rich? Really?
I don't know about you, but when I wake up in the morning, after dressing modestly and saying my prayers, the first thing I do is shed a couple of hot tears for the rich. Think of poor Jeff Bezos, who has watched numbers go up on a screen for eight whole months and only made $40 billion. When is the last time we had a tax cut in this country?
Too long, according to Steven Mnuchin, our Goldman Sachs alumnus-cum-hedgefund gazillionaire Treasury secretary. Speaking offhandedly to a journalist at one of those Letter of the Alphabet Plus Natural Number summits — I think it might have been the G20 — in Argentina, Mnuchin mentioned a scheme he and his underlings have devised that would allow rich people to hire lawyers and accountants to decide how much money they have actually made at tax time.
I wish I could say that I was exaggerating, but this is in fact the case. The plan, which Mnuchin says his staff at the Treasury is in the process of "studying," would allow taxpayers to adjust the value of assets for inflation when they sell them and are forced to pay taxes.
Think about what this actually means. Blueblazer McEntreneurship, after graduating from the same expensive college his parents attended following many years of SAT preparation, worked hard and achieved the American Dream, which is to say, he invested a significant amount of his large salary into Dynamic Engagement Inc. Over the years the stock price of Dynamic Engagement — get this! — went up. Eventually he sells and pockets the no-doubt sizable difference. Imagine being able to chalk up that difference in price not to the fact that McEntreneurship put his money in the company expecting the value of his stake to increase, netting him a profit for doing absolutely nothing, but to the random fluctuations of an intangible, vaguely defined phenomenon called "inflation." The money was just sitting there in a pot and somehow when I came back there was more of it. Don't tax me, bro!
Now to the rest of us morons, a sizable group that includes the Internal Revenue Service, the way you figure out capital gains is simple. You take the price at which you purchased the asset in question and subtract it from what it's worth now. If the number is positive, congratulations, you made money. If it's smaller, you didn't. But inflation does not enter into the equation — and for good reason. Inflation is simply an increase in the prices of things, including shares in publicly traded corporations. For most of us, inflation manifests itself as a noticeable decrease in what economists call "purchasing power." Our wages or salaries stay the same but prices increase — or perhaps stay more or less the same while the quality or quantity of whatever we're purchasing declines. Mnuchin is proposing that the same disincarnate force that makes your groceries more expensive than you remember them being a year ago should excuse the wealthiest Americans from having to pay taxes on income they have earned without lifting a finger.
How stupid do they think the American people are? The idea that anyone, even the most openly, snarlingly contemptuous, entitled, condescending rich person, could dream up a proposal like this, much less float it casually in front of a reporter as if it were the most reasonable idea in the world, would fill me with uncomprehending rage if it weren't so hilarious. Mnuchin and his former finance cronies, who have long supported just such a change to the assessment of capital gains, might as well walk into random family homes or apartments and light them on fire using stacks of $100 bills as kindling. It's almost too ludicrous to take seriously.
Which is why not even Mnuchin thinks it would be possible to get his proposed rule changed approved by Congress and signed into law by the president. Even congressional Republicans aren't this dumb. It hasn't even been a year since they rammed through a tax cut that is projected to save most American families less than 1 percent of the average cost of a year of college. Explaining that, actually, the absurdly low rates at which we tax capital gains in this country are too onerous and that the value of a stock sometimes goes up for complicated reasons that have nothing per se to do with the company's performance or for no reason at all is probably not the best idea in the world before a midterm election. There are isolated lunatic exceptions to this general wisdom, such as Rep. Kevin Brady (R-Texas), who has described assessing rich people's tax obligations on the basis of how much money they have actually made as "penalizing Americans for inflation." But they remain a minority, at least for now.
Instead, Mnuchin is trying to find a way to make the change unilaterally from inside the Treasury. This is not the first time it has been attempted. A memorandum released when George H.W. Bush was in the White House concluded that the department did not have the authority to make such a change.
It would not surprise me if Mnuchin attempted to carry out this scheme sometime in the next few months after Brett Kavanaugh, President Trump's nominee to the Supreme Court, has been confirmed by the Senate. It could take a very long time to hash the issue out in the courts, but what have the people who would benefit from the rule change got to lose in the meantime?
Giving the wealthy the financial equivalent of a time machine to retroactively adjust the size of their earnings is the single stupidest idea ever floated by the Trump administration or any of its officials.