Ain’t it just like Wall Street (and its official house organ, The Wall Street Journal) to get all lathered up over supposed tax reforms that have little more substance to them than the usual, stinking heap of manure we’ve come to expect from Congress? I made a similar point recently in discussing some fine print in the tax bill that would retain the alternative minimum tax for corporations. It were as though the Magna Carta had featured a provision to draw and quarter anyone caught stealing a loaf of bread. So what else is in the fine print? On Tuesday we learned about a provision that would deny equity investors the ability to choose which shares they sell to reduce a position. In the future, if the Senate has its way, any shares sold will be reckoned for tax purposes on a first-in, first-out basis. This is guaranteed to raise one’s tax bill if the shares have been rising. The proposed change is certain to stimulate significant year-end selling ahead of the new law.
Business as Usual on the Hill
And here’s the kicker: If we needed further proof that we are represented solely by jackasses on Capitol Hill, it is this: The FIFO measure would raise a paltry $2.4 billion over the next ten years. And that’s assuming taxpayers do nothing to end-run the levy. Adds the Journal, “Some money managers and analysts say there has been so little discussion of the [change] that investors may be surprised to learn that [it] could reduce — or even wipe out — what they would save from an income tax reduction.” In the meantime, the spectacle of the stock market climbing vertically in anticipation of all the wonderful things the tax bill supposedly will do for the economy would be a joke if it weren’t going to prove so costly for so many. When Congress promises “tax cuts for the middle class,” we should skip the celebration and grab our wallets.