FREE NEWSLETTER
Go to main Forum page »
The Washington Post has an article on yet another effort to cut taxes for the wealthy. This time it is stepping up the cost basis for capital gains to account for inflation. You’d think they’d at least wait for the dust to settle from the recent give away.
I don’t know whether the article is behind the pay wall, it’s not giving me an option to share it so I did a straight copy.
This cuts both ways – some people want more tax cuts (and given who pays most taxes almost any tax cut will disproportionately help those who make more), and some people want the government to pay for more things. Unfortunately, both seem to be getting what they want and that is how we have a growing deficit and national debt.
3 graphs for your perusal.
Federal Receipts as Percent of Gross Domestic Product (FYFRGDA188S) | FRED | St. Louis Fed
From ~1950’s to ~2008 what the government collected in revenue bounced around 17.5% of GDP. Starting in the 2001 recession the trend has been about 1-1.5%points lower (~16%)
Federal Net Outlays as Percent of Gross Domestic Product (FYONGDA188S) | FRED | St. Louis Fed
From ~1950’s to 2008 the government spent between what looks to be about an average of ~19% of GDP, and closer to ~20% from 1980 to 2008. Starting in 2008 – that average is significantly higher due to the huge increases in spending during the 2008 recession and covid. In 2024 the US government spending was over 23% of GDP.
and finally,
Federal Surplus or Deficit [-] as Percent of Gross Domestic Product (FYFSGDA188S) | FRED | St. Louis Fed
From ~1950’s to 2008 the government ran deficits of what looks to be an average of ~2.5% while only exceeding 5% once. Starting with the 2008 recession the deficit looks to be averaging closer to ~7% of GDP with very large excursion for the 2008 recession and covid. In 2024 the deficit was 6.3% of GDP
Bottom line: it’s both taxing and spending. We’ve lowered taxes and increased spending and if both are not addressed this will just get worse.
Oh? My grocery bill increased substantially with inflation. With that came higher sales taxes. TTR is a smoke screen for bad policy and a means to extract even more money from my wallet and that of anyone not on SNAP. Certain politicians think we all are rich. By many measures we are, and anyone above the median is fair game.
According to a site called Acronym Finder there are 66 possible definitions of TTR. Which one are you using? Never seen it before.
TTR = Tax the Rich, PYFS = Pay your fair share.
I don’t know, but I’m guessing “Tax the Rich.”
Why should there be taxes on inflation? I didn’t realize I was the “wealthy” or that I had to be to have a problem with the government causing inflation and then taxing me on my newly inflated assets.
At the risk of being controversial and potentially being exiled from this site, I feel the need to point out that there are two sides to every story. So called tax cuts for the rich are also a major boon to many businesses (and their employees) who benefit from increased spending by the so called rich. Simple pleasures like eating dinner out, buying art, going to a show or ballgame or pretty much any purchase, has a trickle down effect on the people making and serving those meals, creating art pieces, building furniture, manufacturing cars, etc. The last time I looked, consumers still underpin the majority of the economy and not all attempts to fuel the consumer-driven economy should be immediately labeled tax cuts for the rich. For example in this case, people holding on to their homes until they die and the cost basis resets due to the crushing effect of capital gains taxes has contributed to a major shortage of affordable housing, especially for the younger generation. At least some believe the lack of affordable housing is also contributing to the lower birth rates in this country. In my opinion, helping long time homeowners sell their homes without incurring massive capital gains taxes would be a good (and necessary) way to increase home turnover and allow our children to live the American dream. Just another perspective.
The people that are going to receive the least benefit from the recent bill are those that spend 100% of their income only paying for necessities like food, housing, medications, clothing etc. They don’t have the income to buy “Simple pleasures like eating dinner out, buying art, going to a show or ballgame.” They are just trying to survive, many working multiple jobs while others are enjoying those,”Simple pleasures like eating dinner out, buying art, going to a show or ballgame or pretty much any purchase” in their free time.
And watch what happens to those jobs when people stop consuming…
People have to eat, clothe themselves, and preferably sleep indoors. That is all consumption. The fancy stuff you’re talking about only employs a fraction of the population.
I believe you are describing trickle down economics. That has been tried before and shown not to work.
Ok, I do not want to debate whether trickle down economics works or not, but it is pretty easy to see who benefits when the “rich” spend their money.
Yeah, the rich benefit
From the Tax Foundation:
“A common refrain from many progressive lawmakers is that the rich don’t pay their fair share of taxes. “Fair share” is, of course, subjective. But a new Treasury study provides data showing that the rich not only pay more than the middle class, they pay more than one-third of their annual income in federal taxes and more than 45 percent when state and local taxes are included.”
Looks like a lot of that income is realized capital gains. I don’t see the figure you quote, but I didn’t wade through all the tables. Also, those who have more should contribute more.
BTW, under Eisenhower, a Republican president, the top rate was 90%. The effective rate was lower, of course, but still high.
I reiterate that my point was that an unaffordable amount of tax reduction just passed, but some people still want more.
“Some people are never satisfied” is really a lifestyle choice.
Agreed. The idea that you always want more income, less taxes etc. feels a bit exhausting. There has to come a time where you can reflect on what you do have, and find some gratitude for that.
You often complain that pensions in the U.S. aren’t adjusted for inflation, but you’re apparently fine with capital gains not being adjusted for inflation. Can you explain the contradiction?
I was not addressing the specific issue. I was pointing out that the people who just orchestrated a major reduction in taxes for the wealthy, which will balloon the already over-large national debt, are already lobbying for still more largesse. They might equally point out that the cost of a house is not adjusted.
However, since you raise the issue: In the case of capital gains, the owner has benefited from an increase even without allowing for inflation. In the case of pensions, the ex-employee loses out a bit more every year.
I don’t know about you, but I didn’t contribute a penny to my pension, In fact, most such plans to the extent they exist, do not require employee contributions.
A COLA would be nice, but without it I don’t feel like I’m losing. As I previously mentioned, the 401k match by many employers is a good offset in my opinion.
Speaking as a former benefits executive I don’t see it as the employer’s responsibility to increase its cost and liability by increasing benefits for its retirees. I’m just glad have a pension.
I implemented several COLAs over the years for our retirees but each was separately evaluated as to need, affordability and then skewed toward oldest retirees.
Interestingly – or not – the final jobs both I and my wife held were at “not for profits”.
We both have COLA’ed pensions.
We both “contributed” (no choice on our part) about 10% of our salaries.
As Dan points out, wages plus benefits are a total compensation package. However, as I have mentioned before, the same company that did not provide a COLA for its US employees, did provide one for its UK employees. Of course, now I think about it, the UK employees didn’t need expensive medical benefits.
I also used to work for a UK/US company. The UK guys used to call out the Americans for having significantly higher salaries than them for the same role. We would reply that we had to contribute to a 401K and hope it did well enough to generate sufficient income in retirement to come close to their pensions which were quite generous and that after our retirement contributions the salaries were somewhat similar. I always enjoyed chatting with my many UK friends over a beer and this one stoked a few sessions. 🙂
Dick, I’ve always looked at the employer’s contributions to the pension as being made in lieu of wages. So in my opinion, you earned those contributions just the same as you earned your paycheck. Your labor was your contribution.
In theory yes, in practice not really. I don’t know of any employer who terminated or froze a DB plan who made up any portion of the savings in pay.
Likewise two employers one with DB and one not are still going to compete on the same pay levels.
young workers don’t put much value on a pension. They want the cash.
I can’t argue with that. Around 35 years ago, toward the end of contract negotiations, after settling on an adequate wage increase, I made an impassioned proposal for the company to add matching funds to the 401K. The company agreed to a generous match.
Many guys were not impressed, they wanted the cash.
I like your title some people are never satisfied and that’s how I feel too. Although I would benefit from the inflation adjustment to basis for calculating capital gains, I don’t support it in view of our increasing national debt.
unrelated to this what ever happened to the taxation of carried interest that certain wall streeters enjoy as if it was capital gains? Never heard a peep about this during the BB bill negotiations. The media never mentioned it either.
Here is a gift-article link (hoping it works for everyone; sometimes they do not.): https://wapo.st/463eDeC
Thanks. Not sure why I didn’t get that option.
Amazing. Three down votes for a perfectly innocuous statement. What’s wrong with you people?
Welcome to my world.😢
As I’ve noted before, there seem to be some misogynists floating around HumbleDollar who like to down vote comments from women. Whoever you, please go away.
In my opinion, down votes without an accompanying explanation are of zero value. How about it, fellow readers? If you give a downvote, write a brief message why.
Thank you, Jonathan. I usually ignore the haters, but some down votes are just too silly.
That’s not my experience 😱😁
Neither link worked for me, but the article has been archived by others and this one worked.
Basically capital gains tax on stock sales should include inflation adjustment of the original purchase price. Strangely enough that was a feature of the UK tax system until being abolished about 20 years ago.
If there is an inflation adjustment for capital gains then capital gains should no longer receive the lower tax rates. They should be taxes at the same rates as income tax.
Which is how it used to be in the UK when there was indexation. The abolition of indexation alongside lower CGT rates was deemed to be fair. However CGT rates have now been put up most punitively in the lower tax band to 18% (from 10%) vs 20% Income Tax rate.
If the US introduces a system of indexation the quid pro quo should be taxation as ordinary top slice income.