A proposed tweak to the capital gains tax could benefit the rich in the form of a $100 billion tax cut the New York Times revealed this week. And the Treasury Department is looking to bypass Congress to get it done.
The executive branch would be helping wealthy traders, real estate moguls and other rich people in the United States pay far less in capital gains than they currently do by pretending “that the value of the things they are selling were actually worth more than they were when they bought them, and therefore should be taxed in many cases far less,” ThinkProgress reported.
Because the way the capital gains tax works is by requiring people who profit from selling assets to pay a 20 percent tax on said profits. The way the profit is calculated is “by subtracting the initial value of the asset from the current value of the asset,” ThinkProgress reported.
The proposed tweak, which conservative advocates see as an “economic boon,” is exactly the opposite according to a paper by Daniel Jacob Hemel from University of Chicago and David Kamin from New York University. The two authors concluded that any“rifle-shot regulatory action that targets only the capital gains tax would be costly and regressive, and would open a number of large loopholes that allow for rampant tax arbitrage.”
While the Tax Policy Center said in a statement that any proposed change to the capital gains tax is complex, Treasury Secretary Stephen Mnuchin said “if it can’t get done through a legislation process we will look at what tools at Treasury we have to do it on our own.”
But tax analysts said the proposed tweak would create more tax shelters and increase national debt.
While the Trump administration plans to do what it can to get this done, it isn’t the first time a Republican administration has tried the proposed tweak – George H.W. Bush tried and failed in 1992 when his Treasury Department said it was illegal.