Jared Bernstein at Post Everything:
At the heart of the president’s new plan is the closure of a big loophole that benefits the wealthy and inefficiently skews the tax code. When an asset (like a stock) you own appreciates, that income is known as capital gains (what’s that? you depend on your paycheck, not your cap gains? that’s kinda the point…read on). If you sell that asset, you’re taxed, and taxed at a preferential rate, on the so-called “realized” gains.
But if you hold onto that asset you pay no tax on the “unrealized” gains. That income currently escapes taxation, even when—get ready because here comes the loophole, one the White House says is “the largest capital gains loophole – perhaps the largest single loophole in the entire individual income tax code”—you check out of this crazy thing called life, i.e., you die, and you turn those appreciated assets over to an heir.As Jared notes, "progressive policy makers have decided that 'can we get this through the current Congress?' is not a useful question for crafting the necessarily [sic] policy agenda in our age of inequality." Well, yeah, but... sounds like a good idea with populist appeal. I mean, what a scam sweetheart deal for the .01%. So why didn't the Democrats propose this and campaign HARD on it in last November's midterm elections?
The step-up in basis rule should be changed, but your scoffing at Democrats fails to recognize a fundamental characteristic of healthy democracies; policy inertia.
ReplyDeleteOnce upon a time it was not nearly so simple to figure out the basis cost of a dead man's assets, the person who knew having recently passed away. Before computers value literally depended on pieces of paper that one clipped off of bond certificates and various other bits of ephemera.
Thornton, I hope you're not being sarcastic.
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