Elizabeth Warren’s bipartisan bill banning stock trading on Capitol Hill contains a little-noticed provision that could save lawmakers millions of dollars in capital gains taxes — and Nancy Pelosi is signaling that it does. ‘love.
On the face of it, the upcoming congressional stock ownership ban law by Warren (D-Mass.) and Sen. Steve Daines (R-Mont.) would be the toughest proposed crackdown yet on stock market transactions. It would not only ban members of Congress and their wives from trading stocks and require them to place their assets in a blind trust – like another popular Democratic proposal. It would also force them to sell all of their individual shares, sources familiar with the bill told The Post.
Nevertheless, under a less-noticed provision of the bill, lawmakers who convert their shares would also receive a huge sweetener: they could convert their shares into broad-based investment funds or treasury bills while deferring any tax on the most -values until they sell. on the new assets – and if they die before selling the assets, the taxes would be completely waived.
House Speaker Nancy Pelosi (D-Calif.) — who previously dismissed concerns over stock trading by members of Congress but made a dramatic about-face in February when she said she was open to a ban — could save the Warrens millions of dollars — Daines’ capital gains exemption since her husband frequently trades in stocks of big tech companies.
At a press conference last week, Pelosi was quick to point out that a similar capital gains deferral exists for the executive branch, where officials are already prohibited from owning individual shares.
“As you know, in the executive branch, when they divest themselves of their stock, they don’t pay capital gains,” Pelosi said. “So that’s a nice feature.”
According to Robert Willens, a tax analyst and professor at Columbia Business School, the tax savings from the bill for members of Congress could even potentially outweigh the profits they would have made by trading individual stocks, giving donors the double benefit of looking virtuous while making money.
“It’s entirely reasonable to ask whether the benefits of tax deferral — if not the permanent elimination of tax if you die with the property — outweigh the benefits,” Willens told the Post. “It basically confines them to very safe and placid investments while also giving the impression that they are on high moral ground.”
In Willens’ view, the tax deferral would essentially give Pelosi and other members of Congress “interest-free loans from the government.” Pelosi did not endorse the Warren-Daines bill or any other bills regarding stock trading by members of Congress.
In the executive branch, capital gains deferrals have helped wealthy cabinet members save millions. When Hank Paulson left his post as CEO of Goldman Sachs in 2006 to become George W. Bush’s Treasury Secretary, he saved up to $200 million in capital gains taxes, according to an economist. To analyse. And Rex Tillerson, who quit as CEO of Exxon-Mobil to join the Trump administration as secretary of state, deferred about $13 million in taxes through the rule, even though he was later fired, Vox signaled.
While polls indicate a ban on congressional stock trading would be widely popular with the public, some in Washington, DC say the capital gains measure would be politically untenable.
“The mood and the climate are not conducive to giving members of Congress a break on earnings,” a source close to Pelosi told the Post. “Members of Congress would love that, but optically it can’t happen.”
Craig Holman, an ethics lobbyist with the progressive group Public Citizen, supports the Warren-Daines bill, but admits some lawmakers would “benefit” from deferring capital gains.
Under Warren’s bill, a senator forced to sell $1 million worth of Google stock would generally have to pay capital gains taxes at a rate of more than 20% before he could reinvest the money. product. But that senator could reinvest the entire million dollars directly into a broad-based investment fund or Treasury bonds and would only have to pay taxes on the investment if he sold it before he died under of the Warren-Daines bill, which is also supported by Sens Marsha Blackburn (R-Tenn.) and Debbie Stabenow (D-Mich.)
Nonetheless, Holman argues that the postponement is fair.
“If we’re going to require someone to sell all their shares and get into a mutual fund or whatever, it’s entirely appropriate that they don’t have to pay taxes on that.” , Holman told the Post.
A DC source who supports the Warren-Daines bill argued that its intention was to prevent conflicts of interest — not to punish people for being rich before they are elected to Congress.
“We don’t want to deter successful people from running for office,” the source said.
Other insiders believe Pelosi’s support for a stock trading ban is less about her own portfolio and more about her apathy as she considers exit ahead of a possible GOP House sweep in 2022. Sources close to Pelosi have told the Post that she could potentially run for another term, win and then resign shortly after the term — before congressional stock trading rules likely go into effect.
“It’s really a situation after me, the deluge,” said James Lucier, managing director of Capital Alpha, a Washington-based political research firm, referring to the idea of not caring what happens. after someone leaves. “Now that Pelosi is about to leave, maybe she’ll just let it go.”
Pelosi’s office did not respond to a request for comment.
Another proposed stock trading ban by Jon Ossoff (D-Ga.) and Mark Kelly (D-Arizona) would give lawmakers the option of placing their assets in a blind trust rather than selling them outright . The bill does not mention capital gains deferrals for lawmakers who sell their shares, and Ossoff’s office did not respond to questions about whether he would support such a measure.