On Monday, 21 Republican senators, led by Ted Cruz, sent a letter to the Trump administration, proposing that Trump issue an executive order to give another huge tax cut to the wealthy. You might have noticed that Trump and the Republicans don’t talk much about the last tax cut that they gave to the wealthy, since trickle-down economics again didn’t do as much for the 99% as was promised. Which is probably why this one is being kept somewhat under the radar.
But I want to point out that this proposal is actually worse than last tax cut. The Republicans want Trump to index capital gains taxes to inflation. Here is what the GOP is trying to fix, in their own words:
They want to protect investors in stocks and bonds from inflation. How nice! Unfortunately, this only applies to capital gains, which are already taxed far less than income (money for which one actually works being income).
Furthermore, if you have a regular savings account that earns interest, you don’t get any protection from inflation. According to the FDIC, the national average interest rate on savings accounts as of February 2019 was 0.09% APY. That is 20 times less than inflation, which is currently around 1.8%, so your savings account is losing money. But you still have to pay taxes on that interest.
It should be no surprise that 86% of the benefit of the GOP proposal would go to the top 1% of wealthiest Americans.
You are likewise not protected from inflation if you haven’t received a raise recently, or if you are a retiree on a fixed income.
But the really ironic thing about this proposal is that it causes inflation. Inflation is caused by too much money chasing too few goods. When the wealthy get more money, they often use it to buy property. Not just for vacation homes, but also to turn them into bed and breakfasts. This drives up the cost of housing,
I live in a city where housing prices have gone up as much as 30% in a single year, causing homelessness to spike.
So this proposal will actually increase inflation, but the people who will be causing this inflation will be protected from it. That’s just insane.