ATR President Grover Norquist today led a coalition of 51 conservative, free-market, pro-business, and pro-family activists and organizations in calling for President Trump to end the inflation tax on capital gains.
Click here to read the full letter.
Indexing capital gains taxes to inflation would end the unfair taxation of inflationary gains. As the letter notes:
When a family or a business saves money and buys a stock, real estate, or any other asset, the investment grows in value over time. Some of that growth is due to the asset appreciating in real terms, and some of that growth is merely due to the effect of inflation making everything more expensive.
Our tax system does not distinguish between these two increases in savings – the economic growth increase, and the merely inflationary increase. The whole gain is taxable. According to the non-partisan Tax Foundation, fully one-third of all unrealized capital gains are due only to inflation.
With Democrats in control of the House of Representatives, any attempt to pass further tax cuts for the American people is highly unlikely. However, as the letter notes, President Trump has the authority to end the inflation tax through the executive branch’s regulatory authority:
According to legal scholarship going back decades, the executive branch can define cost basis in an investment in such a way that the inflation tax on savings can be eliminated. Rather than having to pay tax on both real and inflationary gains, a family or business selling an asset would only pay tax on the real gain, or the gain derived from economic growth.
Indexing capital gains taxes to inflation will also give the economy a booster shot help bolster every 401(k), IRA, and 529 plan in America.