On Inflation and the Step-Up in Basis Loophole

Now THERE'S a click bait-y headline!

Two things I’m seeing right now are driving me nuts.

The first is the talking point that assumes that the $3.5 trillion (or, if Joe Manchin gets his way, $200) reconciliation bill will be inflationary. Manchin expressed this fear, and so did Bret Stephens, and it’s everywhere in conservative media. I can’t say that the bill won’t be inflationary; the inflationary impact depends on many factors, including ones that are TBD. But clearly, many people believe “spending causes inflation”, and it’s not nearly that simple.

The second thing I’m seeing is progressive whinging over the fact that an Elizabeth Warren-style wealth tax almost certainly won’t¹ be part of the bill. Wealth taxes have become the preferred policy of many on the left despite the fact that they don’t work well, might be unconstitutional, and there are better alternatives. One workable and obvious way to achieve some of the goals of a wealth tax is to close the “step-up in basis” loophole. I wrote an explainer about this (and other tax stuff) back before I had any subscribers, so most of you haven’t seen it, but I sort-of liked the bit about step-up in basis, so I’m repurposing it here.