Following is a statement from Alan Essig, executive director for the Institute on Taxation and Economic Policy, on the paper released today by the Senate Finance Committee’s ranking Democrat, Ron Wyden, calling for anti-deferral accounting, which could dramatically reform the way the U.S. taxes capital gains. The proposal stands in stark contrast to the Trump Administration’s ambition to create yet another tax break for capital gains.
“The term ‘anti-deferral accounting’ probably means little to most Americans now, but the idea, proposed by Sen. Wyden today, has the potential to transform our nation’s tax system.
“Working Americans pay taxes on their income every year. But for very wealthy families, a great deal of income is asset appreciation, and the nation’s tax rules allow them to defer paying taxes on this income for decades, often entirely avoiding tax. Deferring taxes on asset appreciation allows the wealthy few to accumulate increasingly vast fortunes while incomes stagnate for many working people. Sen. Wyden’s proposal could, depending on the final details, end the benefits of this deferral, ensuring that wealthy people are taxed on all their income just like everyone else.
“Sen. Wyden’s key insight is that we cannot continue to have one set of rules requiring working people to pay taxes on all their income each year, and a separate, special set of rules allowing the wealthy to pay taxes on only a portion of their income.”