Trump says he has authority to reduce capital gains taxes
WASHINGTON — President Donald Trump said Tuesday that he is considering giving investors a big tax cut that would primarily benefit the rich, and that he believes he can do it without approval from Congress.
Speaking at the White House, Trump said that the majority of his economic advisers support the idea of reducing taxes on profits that investors earn when selling assets like stocks or bonds. This would be done by indexing capital gains to inflation, which the president believes could be accomplished with his executive authority.
“We’ve been talking about indexing for a long time,” Trump said. “And many people like indexing, it can be done directly by me.”
He added: “I would love to do something on capital gains.”
Economists estimate that such a move would add $100 billion to the national debt. It would also provide the greatest benefit to the top 0.1% of taxpayers, according to an analysis by economists at the Penn Wharton Budget Model.
The comments came as Trump acknowledged that his administration is considering a variety of tax cut ideas, including a payroll tax cut, to stimulate a slowing economy.
For more than a year, Trump’s economic team has been exploring the idea of taking unilateral action on capital gains. Most tax experts expected that the president would attempt to do this by directing the Treasury Department to change the definition of “cost” for calculating capital gains, allowing taxpayers to adjust the initial value of an asset, such as a home or a share of stock, for inflation when it sells.
Republican lawmakers and conservative groups have been encouraging Trump to make the move, which would allow investors to account for rising prices in determining what they owe in capital gains taxes.
Doing so, however, would defy a 1992 legal opinion issued by the Office of Legal Counsel under President George H.W. Bush.
In light of that opinion, Treasury Secretary Steven Mnuchin has been skeptical about how he could go about indexing capital gains without congressional action.
Brian Callanan, who is the Treasury Department’s deputy general counsel and has been nominated as its next general counsel, told staff members on the Senate Finance Committee before his confirmation hearing last month that the change could not be made without a new Justice Department memorandum declaring it legal.
It is possible that Trump could seek a new memo from his Justice Department. However, it is not clear that Attorney General William Barr would validate a reversal. A 2018 Congressional Research Service report on indexing capital gains recalled that Barr, who was also attorney general in 1992, agreed that it could not be done by regulation.
“The question was clear: Can we, simply through administrative action, index capital gains?” Barr said at the time. “Not only did I not think we could, I did not think that a reasonable argument could be made to support that position.”
Cutting taxes for the rich ahead of his 2020 reelection campaign could be politically problematic for Trump. Democrats in Congress have assailed the idea, and on Tuesday the Democratic National Committee swiftly criticized Trump on Twitter for considering a policy that would enrich his wealthy Cabinet members.
Trump said that a decision was not imminent.
“I’m not talking about doing anything at this moment,” he said. “Indexing is something that a lot of people have liked for a long time, it’s something that would be very easy to do. It’s something that I am certainly thinking about.”