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Apr 04, 2022 View in browser   By Bernie Becker Presented by Jackson Hewitt QUICK FIX A NAME I'VE NOT HEARD IN A LONG TIME: Remember the proposal to index capital gains for inflation? Well, it's back in the news a little bit. Former Vice President Mike Pence rolled out a new policy agenda late last week, which looks to be an effort to inch into the 2024 presidential race. (And as our Alex Isenstadt noted, Pence's choosing to release a 19-page blueprint about the future also serves as a contrast to President Donald Trump, who's beenrelentlessly focused on relitigating the 2020 election.) Pence doesn't delve too deeply into taxes in his "Freedom Agenda," but he does propose to index capital gains to inflation. It's an idea that definitely gained some traction during the Trump administration, and something Pence supported when he was vice president. But it's not immediately clear that indexing capital gains — a change that independent analysts agree would largely help the wealthy — would offer all that much in the way of political benefits. As a reminder: When people sell something like stocks after more than a year, they pay taxes on the difference between the purchase and sell prices. But the tax code doesn't account for inflation when taxing that gain. Other parts of the code are indexed for inflation — like the tax brackets for individuals. MORE ON THIS in a bit, but first welcome to the "Guster is for Lovers, back again" version of Weekly Tax. Seriously, why not six? Today marks 48 years since The Beatles held the top five slots on the Billboard Hot 100. (In order: "Can't Buy Me Love," "Twist and Shout," "She Loves You," "I Want To Hold Your Hand" and "Please Please Me." We want to receive your scoops. Email: bbecker@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @tobyeckert, @Brian_Faler, @POLITICOPro and @Morning_Tax.   A message from Jackson Hewitt: For millions of hard-working Americans, Jackson Hewitt is the front door to the tax ecosystem. Over our 35 years in business, we have gained deep insights about how people experience and navigate the complexities of the U.S. tax code. We are committed to working with colleagues, competitors, and regulators to create a better system for all. See what we're doing: jacksonhewitt.com/betterforall   Driving The Day THE CASE FOR: Advocates for indexing capital gains say now's actually the perfect time to be pushing such a policy, with inflation jumping and being a top-of-mind issue for many voters. "People are fired up about the idea that inflation is shrinking their purchasing power, which includes the value of their assets," said Ryan Ellis, a conservative tax lobbyist who was one of the loudest advocates for indexing during the Trump administration. "When I was working this hard in 2019 and 2020, that was a more theoretical concern of people. Now they feel it. They don't like the idea of government-created inflation being used as a predicate to raise their taxes," he added. THE CASE AGAINST: All that said, it's hard to imagine this is the kind of proposal that would worry Democrats, though it's also doesn't seem likely that it would become a front-and-center idea in any campaign. Previously, Democrats have argued that indexing capital gains would do very little for the average worker, pile up more debt and do very little to jolt the economy. And on those first two points at least, they have a point: The Penn Wharton Budget Model found back when this issue bubbled up under Trump that 86 percent of the benefits of indexing would go to the top 1 percent of earners. It wouldn't be cheap, either, probably costing at least $100 billion over a decade. Such proposals also serve as a reminder that Republicans still love to cut taxes, even as the party's relationships with big business, Wall Street and even some business advocates have become more complicated in recent years. Indexing capital gains particularly resonates among some conservatives, too — Sen. Ted Cruz (R-Texas) and Rep. Warren Davidson (R-Ohio) have introduced legislation on the matter. Democrats could certainly try to connect a proposal for indexing capital gains to a broader political theme — that the GOP consistently puts the interest of the top ahead of the bottom. But while Republicans seemingly didn't get many political benefits from their 2017 tax cuts, tying capital gains to inflation wouldn't seem likely to cause the same kinds of problems as, for example,Sen. Rick Scott's idea to force more people to pay income tax. Speaking of which: Grover Norquist of Americans for Tax Reform wrote in a new op-ed for The Hill that Scott's proposal "could cost the GOP its winning brand as the anti-tax hike party" if Republican candidates don't disavow it. A final Pence point: As we noted, the former vice president didn't get too down in the weeds on taxes. But besides indexing, he also appeared to call for pulling out of the global tax deal that was finalized under President Joe Biden (and negotiated in part during Trump's time in the Oval Office, though that team was far more skeptical of the agreement's aims and potential outcomes). Specifically, Pence proposed to "break away from President Bidenʼs global tax policy that puts American companies at a disadvantage to foreign companies and incentivizes moving jobs overseas." OUTSIDE READING OF THE DAY: There has been a lot of talk about what the IRS has to do to get out from under its massive paper backlog. But The Wall Street Journal's Richard Rubin actually went straight to the scene : Ogden, Utah. The federal government is doing whatever it can to quickly hire thousands of workers there for what everyone acknowledges is stable but pretty boring work — manually entering paper tax returns into the IRS' systems, or even just preparing tax returns so others can manually enter them. The IRS currently can hire employees directly for those purposes, without having to jump through the normal hoops needed to ensure the process is competitive. In Utah alone, the agency handed out more than 1,000 job offers after just a couple weeks of job fairs and other recruiting efforts. Final note: Natasha Sarin, a senior Treasury official, noted that there is just a single company that makes and repairs the stamps that IRS employees use to move paper returns along.     Around the World GOING FOR IT: The Peruvian government plans to target the excess profits of mining companies for more revenues, Reuters reports. Peru is the second-largest producer of copper in the world, and its leftist president, Pedro Castillo, vowed to increase taxes on the mining industry before being elected last year. But the government's focus on "surplus profits," as Finance Minister Oscar Graham put it on Friday, also confirms that new taxes on the industry will likely be less sweeping than originally imagined. Copper is currently trading at close to record levels, which has helped increase the profits for Peruvian mining outfits, and the government argues that increasing taxes on the sector will help quiet down some protests that have erupted around the industry. But Graham also said that the government would be careful with its tax increases to ensure that Peruvian mining companies can remain competitive and continue their investments within the country.   SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. Around the Nation LEFT OUT THE BIG ONE: Lawmakers in Kansas agreed on a $90 million tax cut to beat the buzzer on their most recent legislative session, the Topeka Capital-Journal reports. But that measure doesn't include one of the most hotly debated ideas for tax relief. Gov. Laura Kelly, who's running for reelection this fall, and her fellow Democrats want zero out the sales tax on food, and soon — starting in July, if possible. The Republicans who run the legislature want to move more gradually, phasing out the food sales tax by 2025 (and not starting to cut it until after November's elections). Eliminating the 6.5 percent sales tax on food would cost Kansas about a half-billion dollars a year, but Kelly argues that the state is in a strong enough fiscal position to handle that loss of revenue.   A message from Jackson Hewitt: For nearly four decades, we have focused on one mission: helping the hardest working Americans navigate the complex U.S. tax code. We are the front door to the tax ecosystem for the more than 1.8 million taxpayers we serve each year. We are also on the front lines of seeing how taxpayers respond to the complexity of the tax code. We support reforms to make sure that all taxpayers can easily file accurate, error-free, no-fraud returns. We encourage efforts to close the tax gap and join in the call for establishing high standards for paid tax preparers. Our customers are our constituency, and we actively seek to partner with other industry leaders, legislators, and regulators to help create a better tax ecosystem for all. Learn more: jacksonhewitt.com/betterforall   Quick Links Insider on Senate Finance Chair Ron Wyden(D-Ore.): "Meet the college basketball player turned US senator who pitched a tax on billionaires like Elon Musk to fund Biden's economic agenda." The Guardian: "Tories fear poll disaster over high taxes." Bloomberg: "The 1% Tax That Has India's Crypto Industry Predicting Chaos."   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Did You Know? The Beatles ended up with 20 songs that made it to the top of the Billboard charts.   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Aaron Lorenzo @aaronelorenzo   Follow us

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