80 Members of Congress have co-sponsored the legislation in just two weeks since bill was introduced
WASHINGTON — Two weeks ago, Reps. Mike Pence (R-IN) and Eric Cantor (R-VA) introduced legislation, H.R. 6057, which would finally end the unfair practice of taxing inflationary capital gains as part of the capital gains tax. Under current law, taxpayers are currently paying, in part, a tax on inflation. By indexing the cost basis for inflation, this legislation will have the effect of cutting taxes for millions of Americans.
In the two weeks since the legislation was introduced, more than 80 members of Congress have registered their support by signing on as a cosponsor to H.R. 6057. The large response from members of Congress suggests growing support to eliminate the tax on inflation.
“This legislation is really about fairness,” said Grover Norquist, president of Americans for Tax Reform. “Americans should only be taxed on real economic gains and not on gains made by inflation. Members of Congress understand this and are now working to end this unfair tax once and for all.”
According to a study by the non-partisan Tax Foundation, if an investor purchased the average S&P 500 stock in 1973 and sold that stock in June 1994, inflation eroded 65 percent of the $77 capital gain. The investor would pay a tax of $21.55 on an inflation-adjusted gain of $26.77. As a result, the investor yielded 80 percent of their real gain in taxes– leaving the investor with a paltry $5 profit over 21 years. Clearly, this current system of taxing inflation encourages short-term investment and speculation, since the long-term investor is taxed more on inflation.
H.R. 6057 will eliminate this tax on inflation by proposing that gains or losses on the sale of an asset held by an individual taxpayer for more than three years be determined by the “gross domestic product deflator.”
“I urge other members of the House to show their support by cosponsoring this legislation,” continued Norquist. “Ending the tax on inflation is essential to strengthening our economy, increasing asset values, and reducing the overall burden of taxation on the individual taxpayer.”