The Trump administration is considering a plan that would cut federal taxes on investment income, a change that independent analysts say would overwhelmingly benefit the wealthiest Americans.
All told, 86.1 percent of the tax cut, or more than $80 billion, would be captured by the top 1 percent of earners, with the next 4 percent of earners receiving 9 percent of the cut. The remaining 5 percent of the cut would be distributed among the bottom 95 percent of the population.
The change would allow investors to account for inflation in calculating how much they’ve profited off an investment, a change that would typically reduce the total amount of taxable profit. But the change is still being debated internally, and some in the White House believe they lack the authority to make such a change without an act of Congress.
Supporters of capital gains tax cuts argue that the move would juice the economy by incentivizing the wealthy to sell assets and make new investments in ways that would ultimately benefit even lower-income Americans. But many economists point out the super-rich already have vast financial resources — particularly in relation to everyone else.
Data from the World Inequality Database, for instance, shows that the share of national pretax income captured by the top 1 percent of earners roughly doubled between 1980 and 2014, while the share flowing to the bottom 50 percent fell by a similar amount.
The share going to the top 0.1 percent, meanwhile, has more than doubled, and if current trends continue, it will surpass the share going to the bottom 50 percent in the next several years.
These shifts aren’t happening by accident. Over the past 30 years, federal policymakers have made a number of changes to the tax code — including reductions in top income tax rates, capital gains tax cuts and estate tax cuts — that have resulted in a massive redistribution of national income from the poor to the rich.
The tax cuts signed into law by President Trump late last year — containing reductions to the corporate tax rate and lower rates for top earners — appear likely to accelerate these trends. An analysis by the nonpartisan Tax Policy Center found that through 2025, roughly 65 percent of the cuts in that bill will benefit the top 20 percent of earners.
Following the signing of that bill in December, Trump told guests at his Mar-a-Lago resort “you all just got a lot richer.”