by Vice President Knight Allen
Originally published on August 9, 2018 - reprinted with permission
Sometimes I come across something the the financial press which seems
reasonable, but when I get into it a bit more it sends caution lights
flashing all over the place. Such was the case with an article I
read proposing the indexing of capital gains.
most of you know I have been a professional investor since 1980 when I stopped
being labor and became capital. Obviously this proposal would serve my
interests very nicely improving my bottom line on every sale of stock I
make. Imagine what it would do for the members of the Forbes 400
list. The question is: Do we need it? The answer in my opinion
is: NO WAY! I mean, come on. How much more advantage does
about that Forbes 400 list. First, there are no working people on
it. That are all capitalists and their massive fortunes are safely tucked
away inside the corporate structure where the profits compound tax free year
after year after decade after decade. Again, tax free.
Then, if the
400 member wants to monetize some of the assets he can start paying cash
dividends - taxed at a reduced rate. If he wants to cash out he can sell
all or part of his holding for capital gains - also taxed at a reduced rate (top
rate 23.8%). This doesn't even account for the tax breaks and loopholes
for corporations in the tax code. And don't get me started on the crony
capitalism and corporate welfare that have become so dominant in our system
The beauty of
the system is that everyone is invited to play. I accepted in the mid
1970's and have never regretted it once. Perhaps some of you did
too. I hope you did and that you have done well. The point is, none
of us, 400 member or me or any other stock investor need another advantage like
indexing in order to prosper.
You might be thinking this can't happen. It will never become law.
Think again because it doesn't have to. According to the article, because
of a Supreme Court ruling in 2002 (Verizon Communications vs. FCC), regulators
have leeway defining "cost." Plus, "the IRS Code does not
require the cost of an asset be measured only by its original price - meaning
there is no reason the Treasury could not construe it in today's
dollars." This means the President could implement indexing
himself. No Congress. No rules making. No anything.
I hope it doesn't happen. Enough already.
Addendum: No sooner said . . . .
"Treasury mulls capital gains end run." LVRJ 8/1/18
Report from the AP: "The Trump administration is
studying the idea of implementing a big tax break for wealthy Americans by
reducing the taxes levied on capital gains, but no decision has been made yet on
whether to proceed."
Treasury Secretary Steven Mnuchin would like to defer to Congress but, 'If it
can't be done through a legislative process, we will look at what tools at
Treasury we have to do it on our own and we'll consider that."
There is no mention in the article of Verizon vs. FCC.
Since we are
on the subject of indexing and where it shouldn't apply, let's talk about an
areaa where it should apply but doesn't. I'm talking about the income
level subject to Social Security (SS) taxation.
CNBC 10/30/17: "Retirees must manage SS income well to
avoid the 'tax torpedo." The income amounts that are subject to tax
are not indexed for inflation."
Fox Business 3/9/18: Interview with Mary Johnson - Senior Citizens League
SS & Medicare Policy Analyst.
56% of all households pay taxes on Social Security benefits.
"The problem for older taxpayers is the act the income thresholds have
never been adjusted for inflation. When Congress first enacted the tax on
Social Security in 1983 it was estimated to affect only 10% of Social Security
recipients. Today the taxation of benefits hits almost everyone with any
income in addition to Social Security benefits - even people with the most
modest of bottom lines. An older couple with $32,000 is living at just
155% of the federal poverty level. Had the income thresholds been adjusted
for inflation since 1983 the $25,000 threshold for individuals would be $61,940
this year and the $32,000 threshold (couple) would be $79,284."
is an election year and we have some hot and heavy races happening. This
includes a key U.S. Senate race plus all the contests for the House of
Representatives. Have you hear any candidate talking about this? I
haven't and we won't. The system is working far too well for the federal
government to have anyone throw a wrench into the money machine.
bad. But after all this time I guess it does say something about
the mindset, across the political spectrum, of the ruling class.
Vice-President Knight Allen
This site for the NSC
Michael Cannon Website Development.
© 2018 Nevada Seniors' Coalition *
3001 Cabana Drive, Unit 71 * Las Vegas, NV *
89122 * USA
* All Rights Reserved