tax loophole cap gain

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an 12 24

The children of the richest families in the U.S. are well-known for spending their vast wealth on frivolous luxuries—constructing a replica of a medieval church on their acres of property, in the case of banking heir Timothy Mellon, or starting a brand of T-shirts describedby one critic as "terrible beyond your wildest imagination," as Wyatt Koch, nephew of Republican megadonors Charles and David, did.

But a reportreleased by Americans for Tax Fairness (ATF) on Thursday shows how "billionaire nepo babies" don't just waste their families' fortunes. They also benefit from "a rigged system" that allows them to "pass that wealth down over generations without being properly taxed–often without being taxed at all."

In addition, the heirs of the country's biggest fortunes spend vast sums "to elect politicians who protect their unearned wealth and manipulate the country's economy in their favor," said ATF.

Along with Mellon and Koch, the report profiles Samuel Logan of the Scripps media dynasty; Nicola Peltz-Beckham, daughter of billionaire investor Nelson Peltz; Gabrielle Rubenstein, whose family has made its fortune in private equity; and President-elect Donald Trump's son, Eric Trump.

The nepo babies are part of a small group of billionaire families in the U.S. who benefit from tax loopholes that ensure little of their immense wealth ever goes to benefit the public good.

At least 90 billionaires have passed away over the last decade, leaving their beneficiaries $455 billion in collective wealth.

But according to ATF, "$255 billion (56%) of that amount was likely entirely exempt from the capital gains tax because of a special break called 'stepped up basis.'"

"Trump and his allies in Congress are doing their donors' bidding by rigging the system in their favor and pushing a $4 trillion giveaway to wealthy elites and giant corporations."

Without loopholes included the stepped up basis tax cut, the current estate tax on billionaires and centimillionaires would yield enough revenue to fund universal childcare, preschool, and paid family leave for U.S. workers, with hundreds of billions of dollars left over, according to ATF's report.

The wealthy heirs profiled in the report and their families are some of the Republican Party's top donors—contributing hundreds of millions of dollars to candidates including Trump in the hopes of securing even more tax cuts.

Mellon, for example, is Trump's "biggest supporter, giving $140 million to a pro-Trump PAC in 2024 alone," reads the report.

A previous analysis by ATF found that as of late October, just 150 billionaire families had spent $1.9 billion on the 2024 elections.

As the Center for American Progress found earlier this year, Trump's plan to extend the tax cuts that he pushed through in 2017 would cost $4 trillion over the next decade.

"The vast wealth inherited by centuries-old billionaire families is staggering. While these heirs and their billions go undertaxed, enormous sums are squandered on lavish mansions, private jets, and vanity projects instead of funding crucial public investments," said ATF executive director David Kass. "In 2024, these billionaire families used their enormous wealth to make record-breaking political contributions to secure a GOP trifecta. Now, Trump and his allies in Congress are doing their donors' bidding by rigging the system in their favor and pushing a $4 trillion giveaway to wealthy elites and giant corporations—all while advocating for cuts to vital programs that working and middle-class Americans depend on."

The report calls for Congress to pass "proven, pragmatic proposals to unrig the tax system that enjoy high levels of popular support," such as the Ultra Millionaire Tax Actthat was proposed by Sen. Elizabeth Warren (D-Mass.) and Reps. Pramila Jayapal (D-Wash.) and Brendan Boyle (D-Pa.) this year. The bill would tax fortunes between $50 million and $1 billion at 2% and wealth above $1 billion at $1 billion.

The small tax on enormous wealth would generate "a whopping $3 trillion over 10 years," said ATF.

The estate tax could also be "restored so that it can play a meaningful role in promoting fairness and equal opportunities" through the passage of theFor the 99.5% Act, which was introduced in 2023 by Sen. Bernie Sanders (I-Vt.) and Rep. Jimmy Gomez (D-Calif.).

Under the bill, the estate tax exemption would be lowered to $7 million per couple and the current 40% flat rate would be replaced with a sliding scale that would charge higher rates as a family's wealth grows.

"None of these tax reforms would impoverish the ultra wealthy, nor even inconvenience them in any meaningful way–but they would reduce the concentration of wealth that is so corrosive to society," reads the report. "At the same time, they would raise trillions of dollars that could be used to reduce inequality and improve the lives of families that can only dream of the kind of security and opportunity enjoyed by the nation’s richest clans."

"And if rich families ever did need to tighten their belts a bit to pay their taxes," the report continues, "the economizing might begin by reducing the flow of money funding the extravagant lifestyles of America's Billionaire Nepo Babies."

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https://www.alternet.org/trump-administration-proposing-yet-another-massive-tax-windfall-rich

robt r

would be to reduce their capital gains taxes. Those are taxes on the increased value of their stocks and bonds, businesses, and other valuables, when they sell them. Trump would do this by eliminating whatever portion of that increased value was due to inflation.

Here are three reasons why reducing capital gains taxes would be another tax scam for the rich.

1. The people who’d get most of the benefits are already richer than ever and pay a lower effective tax rate than they have in decades. An estimated 63 percent of the benefits of this proposal would go to the wealthiest one-tenth of 1 percent of Americans, while the bottom 80 percent of us would get only 1 percent of its benefits, according to a University of Pennsylvania Wharton School analysis.

If anything, Congress should raise capital gains taxes, not lower them. The capital gains tax rate is already lower than the rate on ordinary income. Yet the wealthy now own most of the nation’s assets and enjoy most of the capital gains. In 2016 (the most recent date for which data are available), the richest 10 percent owned 84 percent of the entire stock market.

2. The cost of this change would be a whopping $10 billion a year, for the next 10 years. That’s just about the yearly cost of funding free lunches for 20 million poor kids. Yet the federal debt is already ballooning. Over ten years, this proposal would increase it by an estimated $100 to $300 billion.

3. Trump and his administration say they have the power to make this change by themselves without even being authorized to do so by Congress. Rubbish. Congress has already decided that capital gains taxes should not be indexed for inflation. That’s why, when the same idea came up during the George H.W. Bush administration, the Department of Justice’s Office of Legal Counsel stopped it cold.

It’s another big handout to the wealthy, another huge increase in the federal deficit, and it’s illegal. Don’t let Trump and his enablers get away with this tax scam for the rich.

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Hours after he launched yet another "direct attack" on workers by canceling a modest pay raise for around two million federal employees, President Donald Trump told Bloomberg on Thursday that he is considering a regressive and possibly illegal plan to use his executive power to hand the rich another $100 billion in tax cuts by indexing capital gainsto inflation.

"There are a lot of people that love it and some people that don't," Trump said of the plan, which would disproportionately reward the top 0.01 percent of Americans. "But I'm thinking about it very strongly."

Trump's Oval Office interview with Bloomberg came shortly after the president announced in a letter to congressional leaders that he is freezing a planned 2.1 percent pay increase for federal workers just ahead of Labor Day, claiming that "federal agency budgets cannot sustain such increases."

But for Trump and the Republican Party, concerns for "fiscal sustainability" are quickly dropped when it comes time to deliver major gifts to the rich, Wall Street, and the Pentagon.  "Hours after cheating millions of middle class workers, Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress," Rep. Bill Pascrell (D-N.J.) wrote on Twitter late Thursday. "He ignores the law, governs for the top one percent, and doesn't give a hoot about the rest of us."

In a Facebook post responding to Trump's decision to cancel federal employees' pay raise—which was set to take effect in 2019—Sen. Bernie Sanders (I-Vt.) wrote that Trump is once again "making it clear he has no interest in supporting working people."

"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead," Sanders added. "Trump and his Republican friends in Congress didn't have any problem finding $1.5 trillion in tax giveaways for the wealthiest people and hugely profitable corporations, but suddenly they don't have enough money to pay fair salaries to hardworking public servants."

Indexing capital gains to inflation—a move that the Trump White House has been considering for weeks—would primarily benefit the richest Americans, given that millionaires pay the vast majority of capital gains taxes. According to the New York Times, 86 percent of the benefits of this change in tax policy would go to the top one percent.

In a Twitter thread on Thursday, Seth Hanlon, a senior fellow at the Center for American Progress, detailed why indexing capital gains to inflation is "both terrible policy and illegal":...

http://www.alternet.org/activism/brave-new-films-trump-slams-hedge-fund-guys-tax-evasion

robt greenwald bnf

Imagine a tax scam so outrageous that even Donald Trump admits it’s inexcusable. Hard to believe, I realize, – along with more information about how organizers are sidestepping the cash-drunk powers that be in Washington and working to put billions of dollars back into state budgets.

The scam is called the carried interest loophole and its beneficiaries are private equity partners and hedge fund moguls– aka virtually everyone at the top of the Trump Administration. Now that he’s in office, Trump isn’t touching it, which surprises exactly no one.

The carried interest loophole allows partners at private-equity firms and hedge funds to treat a big portion of their income as capital gains – that is, as profit on the sale of an investment. Capital gains are taxed at 20 percent, plus a 3.8 percent surtax typically. Compare that to the tax rate for ordinary income – salaries earned by the rest of us – which is 39.6 percent, and you see the problem.

The rational justification for carried interest is nonexistent. The term itself comes from the 12th century when ship captains where paid by percentages of the sale of the cargo they carried. The idea, which was eventually enshrined in the tax code, was to encourage certain kinds of investments by rewarding those who took risks to build businesses. How that got twisted to reward private equity and hedge fund partners who make the vast majority of their millions in fees is lost to history.

Brave New Films: Trump Slams "Hedge

There is one billionaire who claims that the carried interest loophole is good for America because it gives him the money to support philanthropy. Beyond that single example of hubris so mind-blowing you would be forgiven for thinking it is satire, there is virtually no one who will defend carried interest on any rational terms. There is an effort every year in Congress by Sen. Tammy Baldwin and Rep. Sander Levin to get rid of it and even some halfhearted support from one or two Republicans but nothing gets done.

Meanwhile, $15.6 billion that could be going to schools, to clean energy investments, to repairing our nation’s crumbling infrastructure, instead sits in the vaults of multimillionaires.

Fed up with congressional inaction, states are now getting serious and creative about the issue. They can’t change federal tax law, but they can mitigate the damage it does by “repatriating” lost revenue. Some are well into the process, pushed along by Hedgeclippers and other groups standing up for the rest of us.

Several eastern states and Illinois are already well along that path with legislation that taxes the carried interest income of hedge fund and private equity partnerships headquartered in their states.

New York’s proposal would get around this congressional inaction by raising state income taxes on private equity and hedge-fund partners who live in New York. The increase would be equal to the tax savings they receive from using the loophole at the federal level. The aim is for the tax increase to take effect once various states have closed the loophole. That way, the tax could not be avoided by moving to a neighboring state.

Closing the loophole would raise $3.7 billion a year in New York. Estimated annual revenue would be $938 million in Massachusetts, $535 million in Connecticut and $112 million in New Jersey.

Labor, community and activist groups are building coalitions to spread the movement to other states including California, DC, Pennsylvania, Virginia, Ohio and Minnesota. Check out how much money each state stands to gain here. Then check out the Hedgeclippers and see how you can help.

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https://www.propublica.org/article/for-trumps-rich-appointees-death-may-be-certain-but-taxes-arent

There are times when two seemingly unrelated tax policies intersect to create windfalls for fortunate people who are in the right place at the right time.

That is likely to be the case when it comes to calculating the tax benefits that will go to the billionaires and other very rich people joining the Trump administration. Among those who stand to benefit but haven’t been identified until now is Donald Trump’s son-in-law, Jared Kushner, even though he’s not taking a formal government job.

No, this isn’t going to be another screed on the tax code provision that provides a temporary tax break to high-net-worth people who take government positions and have to dispose of some of their holdings to avoid conflicts.

Rather, we want to show you how combining this tax break with repeal of the estate tax — a cherished Republican goal that could be achieved this year - can turn a temporary tax benefit into permanent tax avoidance, enriching the appointees and their heirs.

We’re dealing with substantial money here: at a minimum, tens of millions of deferred capital gains taxes; at a maximum, hundreds of millions. We can’t tell until we analyze filings that appointees haven’t yet made with the Office of Government Ethics. One wild card is their holdings outside of the publicly traded companies with which some of them are associated, because we don’t know what they would have to sell, how much of a gain they would have and how much in capital gains taxes they could defer. Rex Tillerson, for example, owns $28 million to $100 million in land and securities other than ExxonMobil, according to a Dec. 31 report he filed with the ethics office that listed more than 400 holdings.

Other very-well-off Trump appointees whose pending jobs will almost surely make them tax deferral candidates include Wilbur Ross, who made vast sums restructuring bankrupt steel companies; Gary Cohn, former No. 2 executive at Goldman Sachs; Steven Mnuchin, who made a huge profit buying a dead savings institution from the FDIC, reviving it and selling it to CIT, and also has extensive private holdings; Andy Puzder, chief executive of privately held CKE, a big restaurant chain; Linda McMahon, former chief executive of World Wrestling Entertainment; and Betsy DeVos, a scion of a rich family who married into the family of the co-founder of the Amway multilevel marketing firm, now known as Quixtar.

Kushner, who succeeded his father as head of the Kushner Companies, a former New Jersey real estate empire that’s now based in Manhattan, has said he’ll sell assets that pose a conflict with his new role as senior adviser to the president. So we asked his attorney, Jamie Gorelick of WilmerHale, whether Kushner would seek a “certificate of divestiture” from the government to allow him to defer taxes on gains generated by his sales. Her emailed answer: “Mr. Kushner will need a certificate of divestiture for certain divestitures that are required for his compliance with the ethics rules.”

Okay. Now, let’s back up a bit, and get into some of the details.

Under Section 1043 of the tax code, which was enacted in 1989, eligible federal appointees can defer capital gains taxes on securities and other assets that they’re required to sell to meet conflict-of-interest guidelines.

The idea was to avoid imposing large tax costs on people who want to join the government, usually for a lot less money than they’re used to making. As long as the appointees reinvest the sale proceeds in securities approved by the Office of Government Ethics, there’s no tax due on the gains until the replacement securities are sold.

If that happens, the appointees have to pay capital gains tax on the difference between the sale proceeds and the “cost basis”- the cost for tax purposes - of the assets they sold to avoid conflicts. If the replacement securities aren’t sold, the gains tax never comes due.

Now, watch. Under current estate tax law, the cost basis of assets owned by someone who dies is “stepped up” to the assets’ value the day of the person’s death, with no tax due on the gain.

However, people who have gotten substantial Section 1043 tax deferrals are likely to have estates that exceed the current estate tax threshold of about $5.5 million for an individual and $11 million for a married couple. So even if the appointee holds the replacement assets until he or she dies and avoids having to pay capital gains tax, under current rules those assets will be part of the appointee’s estate. The estate will pay up to a 40 percent tax on the assets, leaving less for inheritors.

Repeal of the estate tax — which proponents routinely denigrate as a “death tax” even though only about one estate in 500 is big enough to be taxable — is an integral part of House Republicans’ proposed tax reform package.“Our estate tax is a backstop to our income tax,” says Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. “It imposes taxes at death on income from property that previously escaped taxation, like capital gains that have never been realized.”

Signs are that they intend to push hard to get the tax repealed quickly. “Our pro-growth tax reform blueprint includes fully repealing the death tax in order to protect family-owned businesses,” a spokeswoman for the Republican majority on the tax-writing House Ways and Means Committee emailed us.

Its committee chairman, Texas Republican Kevin Brady, also weighed in.

“I look forward to working with President-elect Trump on tax reform that permanently buries the death tax once and for all,” Brady said. “For too long, this double and triple taxation has threatened family-owned businesses — including women- and minority-owned businesses - from being passed down to their children and grandchildren.”

Rep. Richard E. Neal (Mass.) the top Democrat on Ways and Means, emailed us that “the estate tax is important not only because of the revenue it raises, but also for its role in making the tax code more fair. Dynastic wealth transfer and a landed aristocracy were not what our forefathers envisioned as pillars of our society.”

But Republicans are in power today, and the Democrats aren’t.

The last time a Republican Congress and a Republican president united in a repeal effort - in 2001, under George W. Bush - the estate tax was killed. Sort of. Rather than wiping out the tax all at once, for arcane budget reasons the Republicans merely raised the threshold and lowered the tax rate through 2009. The tax disappeared entirely in 2010, for that year only. It was scheduled to spring back to its 2001 form in 2011, which the 2001 Republicans had thought would never be allowed to happen.

But by then, Barack Obama had become president, the political dynamic had changed and the estate tax was resurrected in a compromise of sorts. It had a much higher threshold and a much lower rate than it did in 2001. It’s projected to bring in about $24 billion this fiscal year, according to Congress’ Joint Committee on Taxation.

It’s not clear exactly how estate tax repeal would work now. The Ways and Means Republican spokeswoman said repeal specifics are not available. “As we transform the blueprint into legislation, we are continuing to hear from the incoming administration about their ideas,” she said.

We contacted Democratic and Republican leaders in the House and Senate to see what they think of this, but could not get a response ahead of today’s inauguration. Trump’s spokespeople also did not respond.

Trump campaigned on a vague promise to tax unrealized gains above $10 million as part of estate tax repeal. That would have had the effect of substituting capital gains taxes for estate taxes on a handful of very large estates. But it’s uncertain how Trump’s proposal would work, or whether he will push legislative provisions that could cost his family and appointees serious money.

Hence our conclusion that a combination of Section 1043 and estate tax repeal would shower huge benefits on Trump appointees, including Kushner and his wife, Trump’s daughter Ivanka.

Under current law, the tax basis of assets is marked up, tax-free, to their value on the day the person who bequeathed the assets died. The 2010 estate tax repeal largely eliminated this provision, which meant higher capital gains taxes if heirs sold the assets.

However, even if the tax-free step-up in basis disappears as part of estate tax repeal, there are numerous ways that inheritors would be able to reap the benefits of the 1043 deferral for years or decades.

“A tax deferred is a tax saved,” tax expert Robert Willens says. And that’s the bottom line.