Friday, March 4, 2016

Hillary Clinton's Tax Plan

Most of us have been caught up in the GOP horror show.  There has been less discussion about important Democratic budget proposals.  This article describes Hillary Clinton's plan which would make the federal tax system about as progressive as it was during her husband's administration.  It would also increase federal tax revenue substantially.  Clinton's plan is clearly different from the plans proposed by Republicans which would make the federal tax system less progressive.  They all propose tax cuts for the super rich. This increases the tax burden for ordinary Americans or it forces the government to reduce spending to avoid huge budget deficits.

In addition to Clinton's plan, there is also a description of more ways to increase federal tax revenue that Clinton does not touch.  The biggest source of tax revenue would be to eliminate one of the huge tax breaks enjoyed by the super rich.  Suppose that a painting were purchased for $100 which increased in value to $40,000,000 after the artist became famous.  If you left that painting to one of your heirs the tax basis for that painting would be $40,000,000.  If that painting were sold by your heir the capital gains tax would only apply to the sale price in excess of the tax basis of $40,000,000.  The huge capital gain passed on to the heir would escape taxation, and the sale of high gain assets prior to death would be reduced.  This has a huge impact on government tax revenue and it passes on wealth inequality from one generation to the following generation.

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