At the bottom of this post you will find various definitions of ‘cost’ from (i) dictionary.com, (ii) Wikipedia, (iii) generally
accepted accounting principles (GAAP), and (iv) the US tax code
In each case the definition discusses cost as
an amount paid, where money is expended, where the money is tied up and no
longer available for use. In none of
these definitions do you see the word “inflation”.
OK, what does this have to do with anything ? Bear with me a moment and it will all become clear
Steve Mnuchin, the Secretary of the Treasury
and Emperor Trump apparently believe that their god-given powers allow them to
re-write over 100 years of established tax law while completely bypassing Congress.
The fact that no other president in the
last century never reached this same conclusion, doesn’t matter to this
administration, which just makes up new shit every day.
The New York Time’s first reported this late
yesterday, stating that the Trump administration is studying this very
possibility. The specific idea is that the
Treasury Department would change the definition of cost to include... an
inflationary component. Let me provide a simple example to explain the impact of this.
Under today’s tax law, if you bought a share
of stock for $100 ten years ago, and sold it for $200 today, you would have a
long term capital gain of $100 and would have to pay a 28% federal capital
gains tax or $28. Under the Emperor’s
new rules that $100 cost basis would be adjusted for inflation, so over 10
years the cost basis might rise to say, $150, and the long term capital gain would be
reduced to $50 ($200 - $150). In this example the capital gains tax
would be cut in half to $14.
Not bad if you are a rich old white guy with a
huge ego who believes his richness is a direct result of his very large brain.
This is simply a boondoggle for the ultra rich
who have tons of unrealized long term capital gains just sitting on their books
waiting for Emperor Trump to come along
The Times sites an independent analysis from Wharton
School of Finance, that fine Ivy League institution that still can’t come to
grips with the fact that they actually gave the Emperor a diploma a half a
century back, which suggest that more than 97 percent of the benefits of
indexing capital gains for inflation would go to the top 10 percent of income
earners in America. Further, nearly two-thirds of the benefits would go to the
super wealthy — the top 0.1 percent of American income earners. The cost to America will be $109 Billion over
the next 11 years
The Times report was confirmed later today
when a Treasury official told FOX Business that the economic impact of indexing
capital gains to inflation was being evaluated by the administration.
The kicker here is that if the Trump
Administration goes through with this, yes it will eventually get overturned in
the courts who will appropriately rule that this power belongs to Congress and
that the Emperor really isn’t an emperor e,ven though he thinks he is. But by the time that happens, it will be too
late. You see by then, Donny Jr. and Eric will have teed up and executed a bunch
of sales to take advantage of this temporary tax windfall, maybe so they can
finally pay down all that Russian debt and laugh all the way to the bank.
Welcome to the New Republican Party. Welcome to the draining of the swamp. Welcome to the greatness of America.
Nothing the Emperor does any more surprises me,
but I really wonder how the rank and file of the Trump base will feel it finally
dawns on them, that they were just being used as pawns in the Emperor’s “allow the rich to
just get richer” scheme.
How will they feel when they finally wake up
one day and sadly realize that unbeknownst to them, they had been the ones
playing the role of the fool all along.
**********************************************************
Definitions of ‘cost’:
Dictionary. Com. the price paid to acquire, produce,
accomplish, or maintain anything
Wikipedia - cost is
the value of money that has been used up to produce something or deliver a
service, and hence is not available for use anymore. In business, the cost may
be one of acquisition, in which case the amount of money expended to acquire it
is counted as cost.
Generally accepted accounting principles hold that the cost principle requires that assets be recorded at the
cash amount (or its equivalent) at the time that an asset is acquired. It may
be one of the most important underlying guidelines in all of GAAP.
US Tax Code - Cost basis is the original value of an asset for tax
purposes, usually the
purchase price, adjusted for stock splits, dividends and return of capital distributions.
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