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 MnuchinCongress raises pressure on Saudi Arabia On The Money: Trump to seek new round of tax cuts after midterms | Mnuchin meets with Saudi crown prince | Trump threatens to cut foreign aid over caravan Trump admin to make Iran oil waivers harder to get 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 WydenOvernight Health Care — Presented by Purdue Pharma — Trump says GOP will support pre-existing condition protections | McConnell defends ObamaCare lawsuit | Dems raise new questions for HHS on child separations Republicans should prepare for Nancy Pelosi to wield the gavel US to open trade talks with Japan, EU, UK 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 WhitehouseSenate Dems ask Trump to disclose financial ties to Saudi Arabia Democrats won’t let Kavanaugh debate die Senate poised to confirm Kavanaugh after bitter fight MORE (D-R.I.), Tom CarperThomas (Tom) Richard CarperOvernight Energy: Trump administration doubles down on climate skepticism | Suspended EPA health official hits back | Military bases could host coal, gas exports Trump poised to sign bipartisan water infrastructure bill Overnight Health Care — Presented by the Coalition for Affordable Prescription Drugs — Senators face Wednesday vote on Trump health plans rule | Trump officials plan downtime for ObamaCare website | Lawmakers push for action on reducing maternal deaths MORE (D-Del.), Ben CardinBenjamin (Ben) Louis CardinGOP leaders hesitant to challenge Trump on Saudi Arabia Dem senator: Trump accepts Saudi denials because he is 'enamored' with dictators Saudi mystery drives wedge between Trump, GOP MORE (D-Md.), Debbie StabenowDeborah (Debbie) Ann StabenowElection Countdown: Dems outraise GOP in final stretch | 2018 midterms already most expensive in history | What to watch in second Cruz-O'Rourke debate | Trump raises 0M for reelection | Why Dems fear Avenatti's approach Republican Senate candidate apologizes after swastika spotted in campaign ad Poll: Dem Stabenow has 9-point lead over Republican James in Michigan Senate race MORE (D-Mich.), Michael BennetMichael Farrand BennetEagles player sits out national anthem Trump administration denied it has ‘secret’ committee seeking negative information on marijuana: report Overnight Health Care: Senators target surprise medical bills | Group looks to allow Medicaid funds for substance abuse programs | FDA launches anti-vaping campaign for teens MORE (D-Colo.), Bob MenendezRobert (Bob) MenendezTrump lowers refugee goal to 30,000, he must meet it Blame Senate, not FBI, for Kavanaugh travesty Dems urge tech companies to remove 3D-gun blueprints MORE (D-N.J.), Bob CaseyRobert (Bob) Patrick CaseyDems target small cluster of states in battle for House Overnight Health Care — Presented by Purdue Pharma — Trump officials move to require drug prices in TV ads | 4,000 more people lose Medicaid in Arkansas | New top official for Medicaid Election Countdown: Cruz, O'Rourke fight at pivotal point | Ryan hitting the trail for vulnerable Republicans | Poll shows Biden leading Dem 2020 field | Arizona Senate debate tonight MORE Jr. (D-Pa.) and Sherrod BrownSherrod Campbell BrownOn The Money: Deficit hits six-year high of 9 billion | Yellen says Trump attacks threaten Fed | Affordable housing set for spotlight in 2020 race Lawmakers, Wall Street shrug off Trump's escalating Fed attacks The Hill's Morning Report — Presented by PhRMA — Dem victories in `18 will not calm party turbulence MORE (D-Ohio).