Tax Cuts for the Wealthy Through Indexation

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Recently, a discussion has been launched about further tax cuts that would benefit, for the most part, the wealthiest 1%. According to several sources, the Trump administration is considering whether or not to cut an additional $ 100 billion in tax cuts, thanks to capital gains indexation , without implementation by Congress. While additional tax cuts can be wonderful for the wealthy, the widening tax gap will have to be filled with something. Some fear that the tax cuts will translate into reductions in other benefits (i.e., Social Security, Medicare and Medicaid) to to come up.

To put it all in perspective, think about how indexing works. For example, if you bought a stock for $ 200.00 in 1980, and today, the stock value is $ 600.00. Instead of paying taxes on the gain of $ 400.00 (in accordance with current tax legislation), the purchase price would be adjusted for inflation to $ 420.00. This means that taxes would only be due on $ 180.00. The idea is to stimulate economic growth within the framework of the economic theory of supply which postulates the creation of jobs by investment by helping the rich to save more.

Although the economic theory of supply is theoretically sound, there is little historical evidence to support the positive economic outcomes of applications of supply theory. At least not for the poorest 90% of the population. According to J.G. Gravelle (2018), senior economic policy specialist at the Congressional Research Service, "the indexation of capital gains would not encourage new investment but rather return savings."

Tax savings are still important for the wealthy, but for the remaining 90% of Americans, it seems like they are still paying the price. Furthermore, at a time when record profits are being reported by multinationals and high net worth individuals, the idea that the public would support such a tax cut seems questionable at best. Plus, wouldn't it be nice to hear about a tax cut for the rest of America. It seems that this would do more to stimulate economic growth than provide greater investment (savings) opportunities for the wealthy.

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