Senate Dems to Mnuchin: Don't index capital gains to inflation

Senate Dems to Mnuchin: Don't index capital gains to inflation
© Greg Nash

A group of Democrats on the Senate Finance Committee is urging Treasury Secretary Steven MnuchinSteven Terner MnuchinThe Hill's Morning Report: Where the Mueller probe stands Treasury releases proposed rules on major part of Trump tax law Dems ask Mnuchin to probe Russian investment in state election tech MORE not to issue regulations to index capital gains to inflation.

"This unilateral action would almost exclusively benefit the wealthiest Americans, add $100 billion to the ballooning deficit, further complicate the tax code, and ignore the need for Congressional sanction," the senators, led by Finance Committee ranking member Ron WydenRonald (Ron) Lee WydenTreasury releases proposed rules on major part of Trump tax law Rubio slams Google over plans to unveil censored Chinese search engine Hillicon Valley: GOP leader wants Twitter CEO to testify on bias claims | Sinclair beefs up lobbying during merger fight | Facebook users experience brief outage | South Korea eyes new taxes on tech MORE (D-Ore.), said in a letter to Mnuchin Thursday.

A number of prominent conservatives, including Americans for Tax Reform President Grover Norquist, have been pushing the Trump administration to index capital gains to inflation. Doing this would reduce the amount that taxpayers pay in capital gains taxes.

Under current law, taxpayers pay capital gains taxes on the difference between the cost of purchasing an investment and the amount for which the investment was sold. If capital gains were indexed, people would instead pay taxes on the difference between cost of purchasing the investment plus inflation and the amount for which the investment was sold.

Conservatives argue that indexing capital gains would boost the economy and prevent people from paying taxes on income they didn't actually make. They argue the Trump administration can index capital gains to inflation through executive action, citing a 2002 Supreme Court ruling finding that the term "cost" was ambiguous in a telecommunications law.

But the Senate Democrats argued that indexing wouldn't spur new investment. They also noted that the Penn-Wharton Budget Model estimated that indexing capital gains would cost about $100 billion over 10 years and would largely benefit those in the top 1 percent of income. The Democrats suggested that cost estimate was conservative because it doesn't take into account tax sheltering that might occur if capital gains are indexed. 

"Like last year's tax bill, Republicans would force families to bear the burden of paying for it through deep cuts they're expected to make to Social Security, Medicare and Medicaid," the Democrats wrote.

The Senate Democrats also said that they don't think Treasury has the authority to index capital gains through regulation. They pointed to 1992 opinions from Treasury and the Department of Justice finding that Congress's intent was for the term "cost" to not include an inflation adjustment.

"We therefore urge you to resist unilateral action on this issue," the Democrats wrote. "To do otherwise would inappropriately circumvent Congress in order to benefit the already super-fortunate at the expense of everyone else."

In addition to Wyden, the letter was signed by Senate Finance Committee members Sheldon WhitehouseSheldon WhitehouseOvernight Defense: Officials make show of force on election security | Dems want probe into Air Force One tours | Pentagon believes Korean War remains 'consistent' with Americans Dems call for investigation of Trump Air Force One tours Dem senators introduce resolution calling on Trump to stop attacking the press MORE (D-R.I.), Tom CarperThomas (Tom) Richard CarperOvernight Energy: Trump elephant trophy tweets blindsided staff | Execs of chemical plant that exploded during hurricane indicted | Interior to reverse pesticide ban at wildlife refuges Overnight Defense: Officials make show of force on election security | Dems want probe into Air Force One tours | Pentagon believes Korean War remains 'consistent' with Americans Dems call for investigation of Trump Air Force One tours MORE (D-Del.), Ben CardinBenjamin (Ben) Louis CardinDems ask Mnuchin to probe Russian investment in state election tech Hillicon Valley: Trump officials deliver show of force on election security | Apple hits trillion | How fake Facebook groups manipulated real activists | Senate group seeks new Russia sanctions Senators introduce bill to slap 'crushing' new sanctions on Russia MORE (D-Md.), Debbie StabenowDeborah (Debbie) Ann StabenowMichigan county investigating ballot shortage in election Michigan Dems elect state's first all-female statewide ticket for midterms The Hill's Morning Report — Signs of trouble for Republicans in House special election MORE (D-Mich.), Michael BennetMichael Farrand BennetWhen it comes to drone tech, wildfire officials need the rights tools for the job NFL player wears 'Immigrants made America great' hat mocking Trump US farmers shouldn't be collateral damage in free-traders' crusade MORE (D-Colo.), Bob MenendezRobert (Bob) MenendezDem senators introduce resolution calling on Trump to stop attacking the press Booming economy has Trump taking a well-deserved victory lap Administration should use its leverage to get Egypt to improve its human rights record MORE (D-N.J.), Bob CaseyRobert (Bob) Patrick CaseyTop Koch official fires back at critics: We are not an 'appendage' of the GOP Dem senator: Media should stop covering Trump rallies like they're breaking news The Hill's Morning Report: Trump tries to rescue Ohio House seat as GOP midterm fears grow MORE Jr. (D-Pa.) and Sherrod BrownSherrod Campbell BrownDustbin 2020: The best Dems who surely won’t get the nomination Vulnerable Dems side with Warren in battle over consumer bureau Early polls favor Biden but Senate officials skeptical MORE (D-Ohio).