September 25, 2006

ANOTHER YEAR OF GOP CONTROL, ANOTHER TAX CUT...:

Stop Taxing Inflation (PHILIP KERPEN, September 25, 2006, NY Sun)

The old fight over indexing the basis for the capital gains tax is starting up again, and this is shaping up to be the best chance ever to finally end the unfair tax on inflationary gains. Legislation sponsored by Reps. Mike Pence of Indiana and Eric Cantor of Virginia, H.R. 6057, would use the Gross Domestic Product implicit price deflator to index the capital gains tax basis for inflation, ending one of the most egregious practices of our tax system. Perhaps more encouraging, it may be possible for the president to introduce indexing administratively, without the passage of any legislation. [...]

The Pence-Cantor bill would be an excellent vehicle for finally ending the inflation tax, but if Congress fails to act, the president should instruct the Treasury Department to index the capital gains tax basis for inflation administratively. The Internal Revenue Code defines a capital gain as the value of an asset when it is sold less its cost, but "cost" is not defined in the code. A regulation interpreting cost in real economic terms would almost certainly pass the reasonableness standard that courts would use in reviewing Treasury Department discretion in the matter.

It has been a decade since the Contract-with-America Republicans led the last major push for this reform, and since then many of the young, enthusiastic House staffers who were in that fight have moved on to positions of influence in the Treasury Department. Thus, the stage may finally be set for ending this long-running battle with a pro-growth victory.


It will be a quintessential victory for Neoconomics.

Posted by Orrin Judd at September 25, 2006 9:18 AM
Comments

Behold the operation of the Republican voter coalition.

Give us live babies, right to life says, let us keep our guns, the RKBA people say, and you may have your mere money. Just never forget that a deal is a deal.

Posted by: Lou Gots at September 25, 2006 1:36 PM
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