Trump says he can order capital gains tax break without Congress
President Donald Trump said he can cut taxes by indexing capital gains to inflation without congressional approval, a move the White House has been considering for months that would largely benefit the wealthy.
“We’ve been talking about indexing for a long time,” Trump told reporters at the White House on Tuesday. “And many people like indexing and it could be done very simply. It could be done directly by me.”
Trump’s comments came as the U.S. economy has shown warning signs that could presage a recession, although economists surveyed by Bloomberg News say there’s only a 35 percent chance of it hitting within the next year.
Trump has recently indicated that he is concerned — tweeting about the “CRAZY INVERTED YIELD CURVE!” in reference to the 10-year Treasury bond rate dipping below the two-year Treasury bond rate for the first time in over a decade — and seeking to reassure Americans.
But indexing capital gains taxes would do very little to spur economic growth, according to the Tax Foundation. The group says the tax cut for investors would increase the size of the economy by 0.11 percent in the long run.
Revamping capital gains taxes through a rule or executive order likely would face legal challenges, a concern that reportedly prompted former President George H.W. Bush’s administration to drop a similar plan.
Indexing capital gains would slash tax bills for investors when selling assets such as stock or real estate by adjusting the original purchase price so no tax is paid on appreciation tied to inflation.
Most of the benefits would go to high-income households, with the top 1 percent receiving 86 percent of the benefit, according to estimates in 2018 by the Penn Wharton Budget Model. The policy could reduce tax revenue by $102 billion over a decade, the model found.
The change in capital gains tax calculation would have little chance of passing Congress, which is why Trump is interested in making the change without legislative approval. The House would likely oppose legislation to make the change, as many Democrats have raised objections to the GOP’s 2017 tax cuts, saying they disproportionately helped the wealthy.
— Jordan Fabian and Saleha Mohsin, with assistance from Laura Davison