David Kamin

The False Promise of Presidential Indexation

The Trump Administration faces mounting pressure from conservative thinkers and activists — including calls from its own National Economic Council director — to promulgate a U.S. Treasury Department regulation that indexes capital gains for inflation. Proponents of such a move — which is sometimes called “presidential indexation” — make three principal arguments in favor of the proposal: (1) that inflation indexing would be an economic boon; (2) that the President and his Treasury Department have legal authority to implement inflation indexing without further congressional authorization; and (3) that in any event, it is unlikely that anyone would have standing to challenge such an action in court. This Article evaluates the proponents’ three arguments and concludes that all are faulty. First, whatever the merits of comprehensive legislation that adjusts the taxation of capital gains and various other elements of the Internal Revenue Code for inflation, rifle-shot regulatory action that targets only the capital gains tax would be costly and regressive, would open a number of large loopholes that allow for rampant tax arbitrage, and would be unlikely to significantly enhance growth. Second, the legal authority for presidential indexation simply does not exist. The Justice Department under the first President Bush reached the conclusion in 1992 that the Executive Branch cannot implement inflation indexing unilaterally, and doctrinal developments in the last quarter century have — if anything — strengthened that conclusion. Third, a number of potential plaintiffs — including a Democrat-controlled House of Representatives, certain states, brokers subject to statutory basis reporting requirements, and investment funds whose tax liability could rise as a result of the regulation — would likely have standing to challenge presidential indexation in federal court. In sum, the promise of presidential indexation turns out too hollow, and calls for unilateral action should be spurned.

When Does Money Matter?: How Health Status Affects the Marginal Utility of Income

This analysis explores how health status affects the marginal utility of income. To analyze this question, I employ a new survey of subjective well-being, the Princeton Affect and Time Survey (PATS), which asks people to report the strength of a number of different emotions as they went about their activities of the previous day. Based on findings from PATS, I conclude that the marginal utility of income is significantly higher for those who report being not satisfied with their health in terms of average levels of pain, sadness, and stress as experienced during the waking day and, also, when measured in terms of a more comprehensive misery index. Having a reported disability that limits the kind or amount of work in which a person can engage has a much weaker relationship with the marginal utility of income, although there is some evidence that this too increases the marginal utility of income especially in terms of pain reduction. Still, any such positive relationship between disability and the marginal utility of income, as measured in this study, appears limited to those who report both having a disability and being not satisfied with their health. Finally, this study concludes that this positive relationship between poor health status and a higher marginal utility of income is largely limited to those near the bottom of the income spectrum.