Tax Policy Should be Good for the Country

The Trump Administration is considering cutting additional taxes almost exclusively for the wealthy by allowing stock market investors to add inflation to their purchase prices of stock.

That hurts the country for two basic reasons.

  1. There is no economic advantage to buying and selling stocks of established companies. It does not provide any funds to the company that can be used to expand operations; it is simply a purchase of a product between investors. In layman’s terms, it’s like buying a toaster at a garage sale – the toaster manufacturer doesn’t get any additional profit from the sale.
  2. This Trump plan guarantees a better return on investment for those who buy and sell stock which means more money that could be stimulating economic growth in other ways will be tied up in the stock market.

As a candidate, Jeb Bush proposed that the lower capital gains rate would only apply to money that was used as investment capital in a business. Gains from money used for start-up companies from venture capitalists and angel investors would have the lower tax rate because that money was used to create companies and jobs. The same is true for money used to expand operations for existing companies. These investments are often made in exchange for preferred stock certificates full of restrictions of how and when the shares can be sold.

Common stock and unrestricted preferred stock, on the other hand, represent part ownership of the company and their sale from one investor to another provides no additional funds to the company. Consequently, Jeb Bush did not believe such transactions should be given special tax treatment over similar transactions which do not stimulate the economy such as putting the money in a savings account.

The Trump Administration plan to allow inflation adjustments to capital gains cost basis calculations is nothing more than a reward to the wealthy supporters of the president – and most likely the president himself – and it’s likely to negatively impact the economy. Such action would exacerbate wealth inequality and reduce the funds available for job creation.

Meanwhile, the reduced tax revenue will mean less money for services used by everyone in the country. There will be less money to rebuild roads and bridges, less for national parks and conservation efforts, less for unemployment compensation during the next recession.

More of the federal budget will go to pay interest on the nation’s growing debt and the vast majority of those interest payments go to the wealthy people, companies and governments that own treasury bills and bonds.

How much more can this country’s middle class take?

About tonyj126

I'm a 50+ married man who always seems to have a large backlog of work to do, but also a lot of flexibility in my schedule. Much of the work I do is volunteer or taking care of extended family members. I suffer from, as my priest calls it, "the sin of self-sufficiency," which means I can figure out how to do most things myself, and consequently, reduce the need for community to solve problems. As a logical extention (at least to me), I find myself called to comtemplate the country's and the world's woes and offer my observations. I hope someone out there will find them useful.
This entry was posted in Economics, Trump Democrats Update, U.S. Politics, Uncategorized and tagged , , , , . Bookmark the permalink.

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