This is it. This is Germany in the 1930s and what you do will be recorded in the history books. Your children and grandchildren will look back and ask what you did. Will you be able to look them in the face?

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Immigration and Customs Enforcement was created in 2003 because America got really really scared of brown people after 9/11. Impossible as it may seem, an agency founded on racism turned out to be filled with racists. We may never discover how the fuck this happened. It’s an unsolvable mystery.

To be more specific, ICE is filled with White Nationalists. This is why they dragged a legal resident out of a van, kidnapped him, and beat the living shit out of him AFTER they knew he was, in fact, a legal resident:

Alejandro Reyes said he was taken into custody by U.S. Immigration and Customs Enforcement despite telling them on several occasions that he's a legal resident.

Reyes told Telemundo Nueva Inglaterra the agents took him to Pine Grove Cemetery — not a detention center — and beat him several times in a dark area. He showed wounds all over his body that he said he suffered in the ordeal.

"They took me from there, they loaded me up, and they took me to the cemetery that is all the way up Boylston Street," Reyes said in Spanish.

There, he said he was attacked by officers who shouted obscenities at him.

It’s important to take a moment to distinguish between “white nationalist” and “white supremacist.” A lot of people use the two interchangeably, and that is incorrect. It’s vital we understand what we are dealing with, so I do a little PSA every now and then.

OK, a white supremacist thinks Those People are less than. They think white people are superior and should be granted special privileges just for being white. They will tolerate the presence of Those People as long as they know their place under the boot of white people. They will use social pressure, economic dominance, and physical violence to keep their “lessers” in check.

A white nationalist, on the other hand, will not tolerate the presence of Those People. They consider sharing a neighborhood, a town, a city, a country with people they consider to be less than human to be a grave insult. They will use any means, up to and including mass murder, to remove them. These are the soulless monsters that initiate genocides.

Like squares and rectangles, all white nationalists are white supremacists, but not all white supremacists are white nationalists.

Tell me, do these sound like supremacists or nationalists?

"When we got to the top of the cemetery, we stopped there and they took off their vests because that's where they have the camera," he said. "Then they pulled me out of the car and kicked me."

Reyes says that after repeatedly asking them to check his wallet, one of the officers finally did so. They realized he did, in fact, have his green card, but questioned whether it was real.

"'I don't know, maybe it's fake' … The other guy says, 'No, it's real' … That's when they finally stopped," he said. "They were planning to keep hitting me because they didn't have good intentions. They took me to a cemetery."

Even so, the threats continued.

"Do you think you're a big shot just because you have a green card? I'll make sure they revoke that green card of yours," Reyes said, recalling what agents told him. "'I'm going to do everything I can to get this paper revoked,' an immigration officer told me."

Yeah…these are Ice Nationalists. These are rabid fucking animals who are praying for the day Stephen Miller tells them they can start killing anyone with brown skin, legal resident or not.

But it won’t stop with brown skin. ICE Nationalists also hate Asians and Jews and feminists and “commies” and Democrats and people with disabilities. They definitely hate protesters, no matter what color or creed they are. They have RFK Jr. whispering eugenics in one ear and Stephen Miller screaming Great Replacement hate in the other.

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The Ogre hates Nazi assholes.

Do you really think ICE Nationalists are going to stop when they purge the country of immigrants? These bloodthirsty fucks will be ready and eager to goosestep their way to the next atrocity. They’ll flock to sign up for Miller’s concentration camps. My god, an all-you-beat buffet of victims? It’s a serial killer’s wet dream.

Just like the Catholic Church and the Republican Party attract pedophiles, so too does ICE attract violent White Nationalists. They get a badge, a gun, and a legal mandate to abuse the people they hate the most. Now, they work for a regime telling them that nothing they do will be off-limits. No cruelty is too much. No act too heinous.

I promise you, we are months or weeks away from a flood of reports coming out of ICE Nationalists raping and killing their way across the country with impunity.

It is absolutely critical that when the regime falls, and it WILL fall, that ICE be disbanded. All of the agents under Trump must be fired and barred from working in any real law enforcement capacity ever again anywhere in the United States. Get a fucking job as mall cop. It’s all you’re qualified for.

Every abuse of power. Every criminal act. Every beating. Every rape. All of it has to be investigated and prosecuted. All of the ICE Nationalists have to be hounded until they’re in prison for what they’ve done. Even the ones who aren’t nationalists. They could have quit before “just following orders.” But they didn’t. They made their choice and now they get to live with it.

Live by the swastika, pay the price for ICE Nationalism, you sick fucks.

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Fascism hates organized protests. They fear the public. They fear US. Make fascists afraid again by joining Indivisible or 50501 and show them whose fucking country this is!

The Blue Wave has begun and the fascist fucks are scared. There are 143 days until it hits Virginia and Pennsylvania. If I were a billionaire fascist loser, I’d think REALLY hard about getting out of the way.

This is what has happened recently in the United States:

A United States Senator, Alex Padilla of California, was physically assaulted, forced to the ground, and handcuffed by agents acting for Homeland Security Secretary Kristi Noem as he attempted to ask her a question. Noem had just returned from a raid on the home of an immigrant family in Huntington Park, California. The agents were attired in full combat gear, including helmets, Kevlar vests, and camouflage fatigues. They carried fully automatic M-4 rifles fitted with 20-round magazines and were wearing masks. They did this under color of law.

President Donald Trump ordered the deployment of more than 4,800 soldiers and Marines to Los Angeles, California. He did this under color of law, specifically, 10 U.S.C. § 12406, a statute which authorizes the federalization of a state’s National Guard if the country is being invaded by the forces of a foreign nation, or to put down a rebellion against the United States government, or to enforce and execute federal laws when the president is otherwise unable to do so. A lawsuit filed in Federal court by Governor Gavin Newsom said that Trump’s actions are “contrary to law and outside of the authority granted to the President under that statute,” and Secretary of Defense Hegseth’s actions in deploying some 700 active-duty Marines “are contrary to law and outside Secretary Hegseth’s authority.”

Donald Trump appeared at Fort Bragg, North Carolina, and gave an unhinged political speech of the kind he regularly gave and gives at political rallies to an assembly of active-duty soldiers from the 18^th Airborne Corps. During the speech, Trump repeatedly mocked his predecessor, President Joe Biden, and asked the assembled soldiers, “You think this crowd would have showed up for Biden?” The soldiers were at the Trump appearance on orders from their Army superiors, and in fact, evidence has emerged that they were hand-picked for their appearance and political views for the occasion. The website Military.com reported yesterday that “One unit-level message bluntly said ‘no fat soldiers.’" Another order to units at Fort Bragg said, “If soldiers have political views that are in opposition to the current administration and they don't want to be in the audience then they need to speak with their leadership and get swapped out.”

Trump recently ordered the renaming of Fort Bragg from Fort Liberty, which the post was named after a law was passed by the Congress renaming Army posts around the country that had been named after Confederate Generals. Trump announced during the speech at Fort Bragg that he was changing the names of seven Army posts back to the names they had before which honored Confederate generals: Fort A.P. Hill, Fort Pickett and Fort Robert E. Lee in Virginia, Fort Gordon in Georgia, Fort Hood in Texas, Fort Polk in Louisiana and Fort Rucker in Alabama. Trump had already ordered the renaming of Fort Bragg and Fort Benning, also named after Confederate generals. The new names of the posts, using the last names of the Confederate generals, are purportedly named after more recent Army heroes. Trump did this under cover of law, because the Congress ordered that the names of the Army posts could not honor Confederates. But everyone knows the truth of what he has done. In fact, he boasted about his defiance of the law during his speech to the soldiers at Fort Bragg.

Since taking office in January, Trump has issued more than 150 executive orders under color of law. Many of those executive orders, which included attempts to shut down entire departments of the federal government such as USAID and the Department of Education, are in defiance of the federal laws passed by Congress establishing those departments.

Others of Trump’s executive orders, issued under cover of law, have resulted in the illegal firings of thousands of federal government employees, many of whom have been reinstated after lawsuits were filed and judges issued orders that they be rehired. One judge recently ordered that the United States Institute of Peace, which is not part of the executive branch and was established by a law passed by Congress and funded in part by Congress, be returned to its board of governors and the building, which was seized by DOGE terrorists, be returned to USIP control.

The Daily Beast today reported on the owner of a roofing business who had a third of his workforce arrested and detained by ICE agents as they drove to work in late May. The ICE arrests and pending deportations were all done under cover of law, even though the men, all from Nicaragua, had work permits and pending asylum applications.

Today, Trump announced on Truth Social that he will order the protection of undocumented workers in certain businesses he apparently views favorably. “Our great Farmers and people in the Hotel and Leisure business have been stating that our very aggressive policy on immigration is taking very good, long time workers away from them, with those jobs being almost impossible to replace," Trump wrote, before once again blaming Joe Biden. “In many cases the Criminals allowed into our Country by the VERY Stupid Biden Open Borders Policy are applying for those jobs. This is not good. We must protect our Farmers, but get the CRIMINALS OUT OF THE USA. Changes are coming!”

Stephen Miller, acting at the behest of Trump, recently ordered Customs and Border Enforcement to step up arrests of undocumented workers who have never been accused or convicted of crimes, including those who work in the industries Trump now seeks to protect. All these contradictory moves, to enforce the law for one group but aggressively apply the law to other groups, are being done under color of law. As reported by the Daily Beast, the consequences of Trump’s illegal application of immigration law are now affecting some of his voters, who own the companies disrupted by the arrests and deportations.

None of the owners of the companies employing undocumented workers have been arrested by ICE during raids on their workforces, including meatpacking plants, farms, garment businesses, and other industries. This disparity in enforcement of immigration policy is, of course, being done under the color of law.

With the tackling, forcing to the ground, and handcuffing of Senator Alex Padilla, and with the arrests and jailing of a mayor and a judge for alleged violations of law, Trump has made it clear that no one is safe from his illegality. Already, ICE has arrested and detained U.S. citizens whom they mistook as being undocumented because of the color of their skin.

This entire Trump regime of illegality is reminiscent of what Black people went through in the South during Jim Crow, when legal behavior by Black U.S. citizens was declared illegal, including the attempt to register to vote, sitting at lunch counters, and riding on public transportation in seats forbidden to Blacks. All the discriminatory behavior of Southern states during Jim Crow and segregation was done under color of law.

The rest of us are now facing the possibility of arrest under color of law for legal behavior such as marching in a demonstration, attending a press conference or rally, or even writing something that offends the sensibilities of Donald Trump.

Governor Gavin Newsom, in a speech on Tuesday, addressed the situation we are in this way: “Democracy is under assault right before our eyes, this moment we have feared has arrived. He’s taking a wrecking ball, a wrecking ball to our founding fathers’ historic project: three coequal branches of independent government.”

It's worse than that, much worse. Trump has said that demonstrations against his big happy birthday military parade “will be met with heavy force.” This is a clear threat to suspend the First Amendment to the Constitution against people he does not approve of, while allowing the First Amendment to protect those who support him. Trump also recently announced that he will eventually do away with FEMA and run the distribution of emergency aid to disaster victims out of the White House. This means that he will allocate federal funds at his own discretion to areas and people who support him, while denying the same tax-payer funds to people who do not.

This is the way dictators run their countries. The law applies to one group, but it does not apply to others. Taxpayer funds are reserved for supporters, but denied to those the dictator does not approve of. The distinction made by the dictator can be made geographically, or by skin color, or by political party, or by religion, or any other criterion he chooses, and because the dictator is in power, he can do it all under the color of law.

To act under the color of law is authoritarian lawlessness writ large. Those of us who oppose Donald Trump will learn this weekend with “No Kings” demonstrations just how far our country has descended into a dictatorship.

I fear for us as individuals, and I fear for our country.

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Trump “sends in the Marines” in a panicky move to make himself look like less of a loser. The press desperately wants to play along but there’s a limit to the bullshit they can shovel.

Maybe they should have planned this out better? But they’re stupid and lazy and if it’s not already in Project 2025, they don't know what to do. Womp womp. Expect more flailing from terrified fascists.

Ogre Nation News Update!

3:30 - 28:37 The LA Protests - Trump has wanted to shoot unarmed protesters since election day 2016. Will he finally have his chance? This is, obviously, the main story for the week and takes up almost half of the episode.

28:38 - 36:50 I Scream You Scream, We All Scream Because of Fucking ICE - Our new segment highlighting the horror of the Trump regime’s immigration “policy.”

36:51 - 40:32 This Week in American Racism - Why are you like this, America?

40:33 - 55:04 Headlines for Short Attention Spans - Squirrel!

55:05 - Pride Month Stories - Celebrating Pride in all of its ups and downs.

Things We Discussed In The Show

Stephen Miller invents a new definition of “insurrection.”

‘Wildly underprepared’: National Guard troops seen sleeping on floors in exclusive photos
Bragg Soldiers Who Cheered Trump's Political Attacks While in Uniform Were Checked for Allegiance, Appearance

Exclusive: DHS secretary sought military arrests and drones in Los Angeles in leaked letter

Dozens Of Journalists Targeted, Shot, Detained While Covering LA Protests, Press Org Says

LA police filmed shooting woman point-blank with ‘less lethal’ round

The Criminal Case Against Kilmar Abrego Garcia Is Highly Suspect

ICE Mistakenly Detains U.S. Marshal in Arizona

Navy vet’s daughter remains in ICE detention despite US citizenship claims

Hooooooly shit. Fucking brutal.

Trump’s Tiny Penis Parade

RFK Jr. ousts entire 17-person CDC vaccine advisory committee

Gov. Reynolds signs bill requiring Iowa public schools to let private students play sports

ABC is too cowed to state the obvious about Stephen Miller

Texas Runoff Results Prove The Tide Is Turning

Democrats Won More Special Elections Last Night

Pam Bondi’s brother crushed in DC Bar Association election

Top Hat Eddie. R.I.P.

What Legal Authority Allows Deployment of Marines Against Civilians

Donald Trump’s penchant for declaring “emergencies” that grant him special power has finally launched a real emergency, sending armed, federal troops into city streets, even moving to deploy 700 Marines from Twenty-Nine Palms Marines into downtown Los Angeles.

Since January, Trump has declared at least eight national emergencies in immigration, economics, energy, all of which open new legal powers to the U.S. president to forgo Congress and that have brought him into direct conflict with the courts.

Trump chose an obscure reading of “rebellion” against his mass deportation to find legal justification to step over California officials to deploy National Guardsmen this week to stop what he sees as interference with ICE raids on day labor sites, neighborhoods, businesses and other sites where undocumented migrants may be found. He stopped short of invoking the Insurrection Act under emergency powers that allow deployment of armed active troops, with all the usual personal ugliness he and Defense Secretary Pete Hegseth could muster, they are quite upfront about the need to “liberate Los Angeles” from any perceived uprising.

But what legal authority allows deployment of Marines against civilians is unclear, as are the rules of engagement, the exact roles they will take on, and who is issuing the orders. How are Marines, trained for “lethality” supposed to act against protesters and rock-throwers?

California Gov. Gavin Newsom and Los Angeles Mayor Karen Bass see it as overstepping of their own authority and overkill in any need for crowd control, and Newsom promises court action to restrict troop deployments. Indeed, protests intensified after Guardsmen showed up, and Trump made clear he was acting without consent of local officials.

Deployment of troops has elevated attention on federal tactics in Trump’s deportation and moved the conflicts over deportation tactics into its own legal, moral and political war. Whether Trump — who ironically has ordered a $50 million military parade in his own honor in Washington next weekend — is creating a discernible emergency from which he then exerts the power to quash street violence with armed, active military troops. It is an open question whether these deployments should be seen as seeking some solutions or to prompt more unrest to justify the deployment itself as an expression of Trump power.

As a New York Times editorial said, Trump’s deployment decision was “ahistoric and based on false pretenses and is already creating the very chaos it was purportedly designed to prevent.”

Trump’s posts have been belligerent and pointed at California’s Democratic leaders as failures because there are protests of any kind to the random campaign to grab and deport migrants — and only then look for any justification of criminal charges.

‘Emergency’ Declarations and Powers

According to the Brennan Center for Justice, Trump’s use of emergency declarations has topped any other president’s. Trump has declared 21 national emergencies across his two terms so far, amounting to 35 percent of all national emergencies declared by the four presidents since 2001.

Using such declarations, Trump has granted himself powers to override Congress about the imposition of global tariffs and to change federal spending already approved by Congress, to close whole agencies, including those distributing foreign aid, and move rapidly towards opening new areas for oil or gas drilling without having to stop for environmental reviews or agency approvals.

As others have moved to challenge these kind of emergency powers, Trump and his Justice Department have relied on Supreme Court “emergency” appeals to skip normally scheduled hearings about the substance of disputed effects of his decisions. Last week, the Supreme Court took exactly that shortcut once again in allowing DOGE investigators access to private data files in Social Security, a ruling that Justice Ketanji Brown Jackson called out in a dissent that basically asked where’s the emergency?

These emergency declarations have led to some weird results. Some coal and gas production plants in Michigan and Pennsylvania that were scheduled to close because they were going out of business were ordered to remain open — at the cost of tens of millions — to comply with Trump’s declaration of a national energy emergency, according to reporting in The New York Times. The costs to keep the plants open are expected to fall on consumers. Experts have said there’s little evidence of a national energy emergency, and 15 states have sued to challenge President Trump’s declaration, which was issued the day he took office.

Their lawsuit contends that emergency powers circumvent review processes that protect public health and safety. Because there is no emergency, they argue, the administration has no legal authority to grant any emergency permits, and the order is invalid.

Power and Dissent

We should be looking at these emergency declarations for what they are — a grab to consolidate power in the White House and to squash any dissent that may arise.

The Washington Post has reporting that says the White House started producing its stacks of emergency orders even before the inauguration and has them ready to be signed as circumstances allow. The

travel ban on individuals from more than a dozen countries that kicked in yesterday supposedly in response to the attack on Jewish marchers in Colorado last week had been readied months ago. According to unnamed staffers, Trump was always going to implement a travel ban.

The announcement was an example of how the Trump administration has been using executive orders and emergency declarations to drive its chosen narrative, push the president’s priorities and sometimes change the subject when news coverage focuses on topics that Trump officials prefer to downplay.

The use of the military — and Homeland Security’s masked, unmarked pseudo-military lookalikes — as part of the deportation campaign is generating special concern because under anything resembling normalcy, the military are barred from domestic law enforcement.

Trump invoked a rarely used provision of the U.S. Code on Armed Services that allows for the federal deployment of the National Guard if “there is a rebellion or danger of a rebellion against the authority of the government of the United States.” Unless you are Trump, no such rebellion is now underway, though there is plenty of unhappiness about the tactics being used.

As the governor’s spokesman and others have noted, Americans in cities routinely cause more property damage after their sports teams win or lose than we are seeing in Los Angeles. The last time this presidential authority was used over a governor’s objections was when John F. Kennedy overruled the governor of Alabama and sent troops to desegregate the University of Alabama in 1963.

Trump believes in law enforcement as the answer, regardless of problem. The military offers the biggest, baddest set of enforcement possible anywhere. What the rest of us may see as legitimate protest against bad immigration policies or tactics, Trump sees as provocation.

Let’s be clear: Whether on college campuses, day labor gathering points, schools or courts, Trump’s goal is to stamp out disagreement with whatever he wants done. He is showing us he is willing to use armed, active-duty troops to do so.

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The post The ‘Emergency’ Ruse appeared first on DCReport.org.

You may have viewed Sen. Joni Ernst (R-Iowa) offering a mock apology for dismissing a constituent’s complaint that the Medicaid cuts she endorses will cause people to die with the flippant remark, “We are all going to die.” She tied her defense of her callousness to Christianity, inviting all who worried about death to convert so they could enjoy eternal life after death. J.D. Vance, too, has defended sharply limited empathy in Christian terms–a theological view for which Pope Francis admonished him. Part of this attack on empathy stems from the resentment of populist voters who feel that empathy is being extended to the wrong people, that they are the ones who deserve empathy, as opposed to various others they despise–immigrants, foreigners, Muslims, blacks, feminists, LGBT people, poor people, etc. Arlie Hochschild, Katherine Cramer, and Justin Gest have written compelling accounts of this. But what does this have to do with Christianity? What happened to “Jesus is love”? 

Now, according to some Christian nationalist pastors such as Joe Rigney, empathy is a sin. It’s toxic. There is a gender angle to this view: women are purportedly more empathetic than men, which makes them unfit to lead men, a church, or anything else. On this view, Christians need a leader like Trump to deliver them from evil, and pastors who oppose this must be pushed out of the movement.

This wouldn’t be the first time a religious movement has taken a secular leader as their model of virtue. But when the secular leader is a malignant narcissist or sociopath–someone lacking empathy–its members are in trouble. I don’t mean to take away from the damage populist anti-empathetic politics does to marginalized people and to democracy. I do mean to reject the demonization of everyone who has embraced this politics as if they are all sociopaths themselves. This, I think, neglects a critical sociological factor in the interpersonal dynamics driving this politics, which inflicts great damage on its participants, very much including the men among them. Ideology can trap people in self- as well as other-destructive social norms. In short: when people are persuaded that they need to accept a bully as their leader, they have to submit to bullies’ rules. Such submission threatens humiliation, emotional stunting, and loss of intimate relationships.

Empathy is simply human. It’s not the special province of women. To bullies, however, it is a sign of weakness. Now join the leadership of bullies to Christian complementarian gender ideology, according to which empathy is effeminate and hence especially contemptible in men. Then boys and men who aren’t themselves malignant narcissists or sociopaths need to suppress their own empathy, lest they become the bullies’ next targets. Communities in thrall to this ideology will side with the bullies and pour their scorn on the bullies’ victims. Male victims then suffer humiliation and may try to vindicate themselves through gender violence. Empathetic boys and men not only become afraid to show empathy, but may even be bullied against their conscience to bully other boys and men perceived as effeminate, to ward off the charge of effeminacy themselves. They must reject anything deemed feminine in themselves, and hold anyone with those qualities in contempt. Under bullies’ rules, boys and men can’t reveal any vulnerabilities, which are also considered effeminate. This is a formula for a decline of social connection and intimacy, which damages straight men and hence straight women as well, especially those who lack the shields and attractions of wealth and power. 

Many of the wealthiest people on earth hold their wealth in the form of a financial asset, like stock in a succesful company. When it comes to capital gains, there is a choice to be made between a tax on “wealth,” which seeks to estimate the value of these gains whether or not the assets have been sold, and an “income” tax that imposes taxes on capital gains only when they are sold (or “realized”). Florian Scheuer makes the case for the second approach in “Taxing capital, but right: Why realized gains, not asset values, should guide tax policy (UBS Center Policy Brief 1, 2025).

Scheuer focuses on the fact that movements in stock prices are often closely linked to interest rates. After all, the price of a stock is determined by the future stream of profits the firm is expected to produce, but the interest rate determines the “present v value” that an investor will put on that stream of future profits. Lower interest rates will tend to boost stock prices, because it means that future profits have a higher present value; conversely, higher interest rates tend to push down stock prices, because future profits will have a lower value in the present. Scheuer offers this example:

Take a stock that pays a constant dividend of $100 per year forever, and suppose the interest rate is 10%. Then the stock price, which reflects the present-discounted value of the flow of dividends, must equal $1,000. Now suppose the interest rate falls to 5%. As a result, the stock is now worth $2,000: The stock price doubles, a massive capital
gain. But notice that the dividends paid by the stock have not changed at all: They
are still $100 per year. Therefore, the income and lifetime consumption possibilities
for someone who does not sell have not gone up. The capital gains of $1,000 are a pure “paper gain.” Of course, an investor who sells the stock can cash in on the gains, resulting in an increase in consumption. Conversely, an investor buying the stock loses: She needs to pay twice the amount for the same fl ow of future dividends. In sum, sellers gain, buyers lose and those who hold the stock are unaffected. This is why a tax on realized gains is aligned with who gains and loses from asset price fluctuations. By contrast, a tax on unrealized gains (or a wealth tax) would fully tax the “paper gains” of those who neither buy nor sell even though they do not benefit from their capital gains.

Scheuer also points out that paying capital gains tax whenever a sale occurs will tend to lock investors into their existing investments–because they would owe income tax if they decided to sell one stock and buy another. Scheuer argues that sell-and-immediately-reinvest should not be taxed. The result of such a transaction is again a paper gain, rather than actually realized income. And it’s generally a good thing for investors to be able to reallocate their portfolios.

So far, those who would prefer to see a wealth tax or greater taxation of capital gains presumably don’t like what they are hearing from Scheuer, at least as I have described it so far. But Scheuer also argues that perhaps the biggest loophole in capital gains taxation should be closed. I refer here to “step-up in basis at death,” which basically means that if someone dies and passes an asset along to their heirs, the capital gains of that asset are never taxed. Scheuer argues that passing along assets at time of death should be treated like a “realization” of gains.

The capital gains tax systems in the U.S. and many other advanced economies feature a particularity referred to as step-up in basis at death for inherited assets. This tax rule eliminates the taxable capital gain that occurred between the original purchase of the asset and the time of inheritance, thereby reducing the heir’s tax liability. Effectively, it completely exempts from taxation all capital gains accrued during the original holder’s lifetime if she never realizes the gains but passes them along at death. This is considered a major tax loophole, and indeed comparisons between capital gain realizations reported on income tax returns with historical stock market gains suggest that a large share of all capital gains on corporate stock was never taxed purely because of this provision. Our findings imply that this tax rule should be abolished in favor of a “carryover basis” approach, which makes the heirs subject to a tax on the full gains going back to the original purchase price, and which is already used by a number of countries including Germany, Italy, and Japan.

Relatedly, a tax avoidance strategy of wealthy families known as “buy, borrow, die” has received attention in recent years. The idea is to borrow against appreciating assets rather than selling them and then taking advantage of the stepped-up basis at death, thereby avoiding capital gains taxes altogether. Eliminating the stepped-up
basis loophole would also close the door for this avoidance strategy.

Changing the “step-up in basis at death” can be done in two ways. In the version Scheuer describes, the value of capital gains is taxed on those who receive the inheritance. An alternative method would be to tax the estate of the decedent, as if that person had realized the gains at time of death. According to estimates from the Congressional Budget Office, either approach would raise tens of billions of dollar per year. However, a tax on capital gains nominally paid by the decedent raises more revenue that a tax on capital gains paid by the heirs, because the income received by heirs is broken up into smaller chunks and taxed at lower rates.

The post Taxing Capital Gains Only After Realization first appeared on Conversable Economist.