The Clause 5 Loop
Atlas

19The verdict

The outcome left standing

One answer at each either-or

  • One answer at each fork.
  • A dollar gain is income, and the Origination Clause keeps its full effect K-A3 · strong support.
  • Inflation is neither a “Tax” in the Constitution’s sense nor a “Bill” K-B2 · strong support.
  • The Court has decided every part, never the whole K-G2 · strong support.
  • The remedy is legislative: a Bill to index basis, begun in the House.

On the Constitution’s words, taxing inflated gains stands, with strong support. It is a policy choice, and Congress can change it with a law that adjusts for inflation.

What the grades meannine grades, from the firmest to the weakest
  1. statedThe source says it in its own words, and the study quotes them.
  2. it followsLogic alone gets there from what is stated, and a computer solver checks the step.
  3. strong supportThe evidence for it far outweighs the evidence against it.
  4. moderate supportMore of the evidence points for it than against it, but real evidence points the other way.
  5. one readingThe words allow it but do not require it; another reading fits them as well.
  6. left openThe evidence does not settle it either way.
  7. weak supportSome evidence points for it, but more points against it.
  8. not shownIt is claimed, but the record does not establish it.
  9. ruled outThe words or the logic exclude it.

A chain is only as good as its weakest link: a conclusion never gets a better grade than the weakest step it needs.

What you can do next

  1. Walk the argument

    Eleven stops on a gold thread, from Clause 5 to the outcome left standing.

    Walk the argument

  2. Take it to the House

    The remedy the record leaves standing is legislative: a Bill to index basis, which must begin in the House. Any Representative can introduce one.

    Find your Representative

  3. Ask before you sell

    This is a study of the texts, not tax or legal advice. A tax professional can tell you what the law asks of your own sale.

Read in full349 words · the study as written

Text 01. A nominal gain is taxable as “gain”, counted in the dollar Congress defines, and the Origination Clause keeps its full effect (K-A3, strong support). The ratifying generation counted income in money, “The return in money” (Black’s, 1910), and taxed gains in dollars through a doubling of prices. The clause governs “All Bills for raising Revenue”, and the Bills that taxed gains began in the House. Both horns of the binary stand at weak support, below it.

Text 02. Inflation is neither a “Tax” in the Constitution’s sense nor a “Bill”. It is an effect of the powers to borrow and to regulate the value of money, exercised under statutes that passed the House (K-B2, strong support). The transfer it brings about is real at moderate support (BC2), and no new revenue Bill passes when it does.

Gavin’s question. The Supreme Court has not decided the loop as a whole, and it has decided each of its parts (K-G2, strong support).

The loop itself. The loop is real at moderate support. The government aims at “inflation at the rate of 2 percent”, and the Code taxes the dollar gain that rise produces, counted from “cost” with no adjustment for inflation. Congress named the effect in 1981, the “INFLATION-CAUSED TAX INCREASE”, and cured it in the brackets, not in the basis.

Where the remedy lies. How to measure gain is Congress’s choice (K-A7, strong support). The Treasury “does not have legal authority to index capital gains for inflation by means of regulation”, and the words leave the measure of gain to the law. The remedy the record leaves standing is legislative: a Bill to index basis.

What would change the answer. The record names what would. A source of 1909 to 1913 that counts income in purchasing power would lift AU4. A holding that inflation is a “Tax” in the strict sense would lift BU6. A holding that the Federal Reserve is the Executive, and that its delegated power bypasses the House, would lift AU2 and AU11. None of these is in the record.