“This is a lot like a duck swimming in a pond,” said Ryan Ellis, a tax lobbyist in Washington and a former tax policy director at Americans for Tax Reform, who is helping to lead the push for the capital gains change. “All the real action is happening underneath the surface.”
If the administration took that step, however, it would inflame Democrats’ critique of Republican tax policies, because adjusting capital gains for inflation would mainly benefit the wealthiest Americans. Economists from the Penn Wharton Budget Model project that the move would amount to an $88 billion tax cut over a decade for the top 1 percent of income earners in the United States — and a $14 billion cut for the other 99 percent.
Taxes and the 2020 race
Soak-the-rich talk seems likely to escalate as Democratic candidates jockey for advantage in the 2020 presidential primaries. Increased taxation of high-income, high-wealth people can be a means of funding new social spending programs like universal prekindergarten education. It can also be a direct way of reducing inequality and wealth in the United States.
At the very least, in the months ahead, you’re likely to hear a lot about millionaires and billionaires paying their “fair share.” And you will probably hear about reducing taxes on middle-class workers — who, thanks in part to the Trump tax cuts, pay a lower marginal tax rate than they have in 30 years, according to the Congressional Budget Office.
The campaign language may suggest what you can expect if Democrats win in 2020: If you’re a millionaire or a billionaire, expect efforts to tax you more. If your income is lower, you might be in line for a break from the feds.
“Taxes on the rich are going to go up, and they will likely go up a lot,” said Michael Linden, a fellow at the liberal Roosevelt Institute who has been a fervent opponent of Mr. Trump’s tax policies. “The fundamental, underlying dynamic is that with near-record inequality, an aging population and an overall economic system that favors the haves over the have-nots, it’s just untenable to have an overall tax code with as little progressivity as ours has, and generates as little revenue as ours does.”
On the other hand, if Mr. Trump wins and Republicans sweep Congress again, you can expect a different vision to prevail — one that embraces the new tax law. Its provisions for individuals are generally set to expire at the end of 2025, but with a strong Republican mandate, those cuts are likely to be made permanent.