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 MnuchinHillicon Valley: Facebook weighs crackdown on anti-vaccine content | Lyft challenges Trump fuel standards rollback | Illinois tries to woo Amazon | New round of China trade talks next week On The Money: Trump declares emergency at border | Braces for legal fight | Move divides GOP | Trump signs border deal to avoid shutdown | Winners, losers from spending fight | US, China trade talks to resume next week Treasury sanctions top Maduro allies in Venezuela 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 WydenDem lawmaker: 'Trump's presidency is the real national emergency' Dems introduce bill to take gender-specific terms out of tax code to make it LGBT-inclusive 8 surprising times our intel community spied on US citizens 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 WhitehouseNew battle lines in war over Trump’s judicial picks Dems probing whether NRA made illegal contributions to Trump Senate panel advances Trump's pick for key IRS role MORE (D-R.I.), Tom CarperThomas (Tom) Richard CarperDems slam EPA plan for fighting drinking water contaminants EPA to announce PFAS chemical regulation plans by end of year Overnight Energy: Zinke joins Trump-tied lobbying firm | Senators highlight threat from invasive species | Top Republican calls for Green New Deal vote in House MORE (D-Del.), Ben CardinBenjamin (Ben) Louis CardinBipartisan Senators reintroduce legislation to slap new sanctions on Russia Baseball legend Frank Robinson, first black manager in MLB, dies at 83 Biden speaking to Dems on Capitol Hill as 2020 speculation mounts: report MORE (D-Md.), Debbie StabenowDeborah (Debbie) Ann StabenowThe Hill's Morning Report - Presented by the American Academy of HIV Medicine - Will there be any last-minute shutdown drama? Overnight Health Care — Sponsored by America's 340B Hospitals — Utah tests Trump on Medicaid expansion | Dems roll out Medicare buy-in proposal | Medicare for all could get hearing next month | Doctors group faces political risks on guns Dems offer smaller step toward ‘Medicare for all' MORE (D-Mich.), Michael BennetMichael Farrand BennetDemocratic donors stuck in shopping phase of primary Overnight Health Care — Sponsored by America's 340B Hospitals — CDC blames e-cigs for rise in youth tobacco use | FDA cracks down on dietary supplements | More drug pricing hearings on tap The Hill's Morning Report - Presented by the American Academy of HIV Medicine - Next 24 hours critical for stalled funding talks MORE (D-Colo.), Bob MenendezRobert (Bob) MenendezWilliam Barr is right man for the times This week: Trump delivers State of the Union amid wall fight BuzzFeed story has more to say about media than the president MORE (D-N.J.), Bob CaseyRobert (Bob) Patrick CaseyGOP wants to pit Ocasio-Cortez against Democrats in the Senate Biden speaking to Dems on Capitol Hill as 2020 speculation mounts: report GOP senators: Trump should not declare border emergency during State of the Union MORE Jr. (D-Pa.) and Sherrod BrownSherrod Campbell BrownPollster says current 2020 surveys like picking best picture Oscar before movies come out Shep Smith: Signing funding bill is a 'loss' for Trump no matter how it's packaged Exclusive: Biden almost certain to enter 2020 race MORE (D-Ohio).