Is index Capital Gains for inflation happening? Good or bad?

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cj2018
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Is index Capital Gains for inflation happening? Good or bad?

Post by cj2018 » Thu Aug 09, 2018 7:16 pm

Seems like for tax cut 2.0, there's some push to index stock capital gain for inflation by the current admin which would result in higher cost basis and lower tax bill when calculating capital gain tax (conversely, a higher tax loss that can be harvested)

Example: cost basis at $2000 in 2020, sell at $3000 2 years later, the amount of LTCG getting taxed would be $3000-$2000*(1+rate of inflation)^2.

Personally, i think there's some merit in this direction and below are my rationales:
  • I'd happily pay tax on real gain which is partially reflected in price appreciation
  • however, paying tax on price appreciation caused by inflation (defined as an increase in supply of fiat currency), which also is partially reflected in price appreciation, seems kina unfair and i guess is the point of this new proposal
Essentially, through my capitalist lenses, i'm interpreting this as the government saying "hey stock owners, we will properly compensate the lost purchasing power of your dollar, which is caused by us via inflation in the first place, so hopefully you can do a better job allocating the surplus capital in the form of private money to the real economy than us in the form of hidden tax via inflation".

Would love to get some thoughts from the community on this topic? (critics on my personal view above is welcome as well.. :sharebeer )

Reference: https://www.nytimes.com/2018/07/30/us/p ... -rich.html

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prudent
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Re: Is index Capital Gains for inflation happening? Good or bad?

Post by prudent » Thu Aug 09, 2018 7:26 pm

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