Let’s Index Everything for Inflation!


Andrew Stuttaford is unhappy about the state of the U.S. tax code:

And then there’s capital gains (due to rise, of course, courtesy of Mr. Obama), and still not adjusted for inflation, a deliberate anomaly that means the taxpayer pays real taxes on unreal “gains”. Even the amount of the best-known capital gains tax exemption (on the sale of a primary residence) of $500,000 for a couple, $250,000 for a single person, hasn’t been changed since 1997. That won’t matter for most, for now, but give inflation QE and time: The IRS is waiting.

That’s pretty sad. I wonder how he feels about indexing the minimum wage to inflation? In any case, speaking for myself, I’d be willing to level the playing field by adjusting capital gains taxes to inflation just as soon as we level the playing field by increasing the capital gains rate from its current 15% to the rate charged on ordinary income. Oddly, though, rich people seem uninterested in making such a bargain. Inflation and all, I guess they must think the current setup is a fairly sweet deal.

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