Bloomberg News and CNBC report that the Trump administration is seriously considering a rule change which would stop the IRS from taxing investors based on phantom gains from inflation.
Let’s say you buy an investment for a hundred dollars and sell it a few years later for 105 dollars, but inflation was 5 percent. You didn’t really make any money. In real purchasing power, you just broke even.
The way the system works now, you’d have to pay taxes on that five dollars. That’s not taxing income; that’s confiscating wealth.
Larry Kudlow, now the president’s chief economic advisor has long been a champion of the idea, and it looks like the president is on board. And: It looks like the president can do this without buy-in from Congress.
We should hope the president embraces this idea and moves forward with it.
It’s good economics—and it would be good politics as well.