Conservatives urge Trump to issue order on capital gains taxes

Conservatives urge Trump to issue order on capital gains taxes

Leaders of prominent conservative groups are urging the Trump administration to issue an executive order to index capital gains taxes to inflation, arguing that doing so would end taxes on "phantom income."

"For much the same reason that regular income tax brackets were indexed to inflation over 30 years ago, we believe that it is only a matter of fairness to do the same for capital gains," the conservative leaders said Monday in a letter to President TrumpDonald John TrumpCEO of American investment firm believed Michael Cohen could bring in GOP donors for deals: report NAACP slams NFL for gag rule on national anthem Pelosi: Republican meeting over informant will 'nix' possibility of bipartisan briefing MORE and Treasury Secretary Steven MnuchinSteven Terner MnuchinMy farm crops gained K in value since Trump delayed China trade war — but it’s not a done deal The Hill's Morning Report — Sponsored by PhRMA — Republicans see some daylight in midterm polling Republicans think Trump is losing trade war MORE.

Under current law, when people sell investments, they pay taxes on the difference between the amount they sold the investment for and the amount for which they purchased it. But the conservatives argue that taxpayers' actual gains are lower than the amount that's currently taxed because of inflation.

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"For example, if someone saving for retirement purchased an S&P index fund for $1,000 in 2008 and dutifully held it for ten years, they could now sell it for $1,934. That’s a gain of $934," the conservative leaders wrote. "Unfortunately, the full amount would be subject to taxation. But $168 of that $934 isn’t a real gain at all. It’s phantom income that was eaten away because of inflation. And yet, taxpayers are currently forced to pay taxes on this nonexistent income."

The conservatives argue that indexing capital gains to inflation would boost the economy and encourage people to save more for the future.

"By preventing the money from unjustly going to the government, it could be re-invested in the economy, allowing businesses to expand, innovate, and create more jobs," they wrote.

The signers of the letter also said that an executive order on capital gains would help to build on the tax law Trump signed in December.

"Now that tax cuts has been successfully passed into law, we believe now is the right time to continue your successful leadership in bringing about real economic growth through additional tax cuts," they wrote. "This executive order would do just that."

Conservative leaders who signed the letter include Club for Growth president David McIntosh, Americans for Tax Reform president Grover Norquist and Heritage Action vice president Dan Holler.