Federal Tax Headlines

The GOP’s Capital-Gains Tax Hike

The Senate bill would make you sell long-held stocks first.

Republicans are on final approach to land their tax bill out of House-Senate conference, and for the most part the winds look favorable. Yet one surprising provision in the Senate bill would gratuitously harm individual investors, and the GOP ought to eliminate this de facto increase on capital-gains taxes.

The Senate bill creates a “first-in, first-out” requirement for investors who sell their stock investments. Stephen Entin at the Tax Foundation describes it this way: A person buys 100 shares of a company at $25 a share in 1990. Then in 2005 he buys a 100 more for $50 a share. Now he wants to sell 100 shares at the current price of $100. The Senate bill would force this investor to sell the older shares first, which would expose the investor to a higher tax liability on the capital gain—a gain of $7,500 versus $5,000.

 

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