Trump’s Capital Gains Taxation Idea Could Have a Surprising Victim

President Trump thinks capital gains should be indexed to inflation so people pay taxes only on their real profits, not the phantom part that comes from inflation. This makes sense: If your asset rises in price 5% between purchase and sale but the general price level also went up 5% during the time you owned it, you haven’t made a real capital gain, so why should you pay a capital gains tax?

The obvious flaw in the Trump fix is that indexing capital gains for inflation would be a windfall for the richest of the rich. According to the Tax Policy Center, the 1 percent wealthiest households received 69% of taxable long-term capital gains in 2018. Trump has acknowledged that problem in the past, saying a year ago that indexing is “perceived as somewhat elitist.”