The White House's coronavirus cure is even more magical than we could have imagined (WaPo column)

[scarletwoman]

3. Further excerpts:

Then there are the various proposals to cut — or possibly eliminate — capital gains taxes, a favorite hobbyhorse of White House economic adviser Larry Kudlow. This would be a huge windfall for the wealthiest Americans and is unlikely to have any substantial stimulative effect on the economy.

Capital gains are already taxed extremely lightly. Long-term capital gains are taxed at a preferential (that is, much lower) rate than regular income. And most of those gains accrue to the ultra-wealthy. According to the Tax Policy Center, three-quarters of taxable long-term capital gains go to households in the top 5 percent of the income distribution.

“A capital gains tax cut would be both ineffective and regressive,” said Steven M. Rosenthal, a fellow at the center.

Then there’s the proposal to make permanent a provision of the 2017 tax law, one that allows firms to immediately write off the full cost of most kinds of capital investments.

Already, full expensing is in effect through 2022. This proposal, then, would “spend billions to incentivize businesses to buy equipment 32 months from now,” as New York University law professor Lily Batchelder put it, remarking that this was “among the dumbest stimulus ideas I’ve ever heard.”

If anything, this proposal might discourage businesses from spending, because there’d be no urgency to get the expensing in while it could be fully written off. Businesses could wait indefinitely to build factories or buy equipment, knowing that the tax break would always be there.