The Trump administration is considering acting unilaterally to institute a $100 billion tax cut that will largely benefit the wealthy, according to a report in The New York Times.
The Times reported that Treasury Secretary Steven MnuchinSteven MnuchinMenendez, Rubio ask Yellen to probe meatpacker JBS The Hill's Morning Report - Presented by Goldman Sachs - Biden rallies Senate Dems behind mammoth spending plan Mnuchin dodges CNBC questions on whether Trump lying over election MORE at a recent G-20 meeting in Argentina said if the tax cut can't be done through Congress, the administration will “look at what tools” are necessary to consider the move.
“If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that,” Mnuchin said. “We are studying that internally, and we are also studying the economic costs and the impact on growth.”
At issue is a priority of conservatives to reduce the amount that people pay in capital gains taxes by indexing capital gains to inflation. Republicans see this action as a way to build off the tax-cut law that Trump signed last year, and say it would boost the economy by increasing incentives for taxpayers to make new investments.
Under current law, people pay capital gains taxes on the difference between the amount for which they purchased an investment and the amount they sold it for. But conservatives instead want people to pay capital gains taxes only on the difference between the cost of purchasing the investment plus inflation and the amount for which the investment was sold.
Legislation to index capital gains to inflation has been introduced by Rep. Devin NunesDevin Gerald NunesLIVE COVERAGE: Ways and Means begins Day 2 on .5T package Biden faces unfinished mission of evacuating Americans Nunes sues MSNBC, alleging Rachel Maddow defamed him MORE (R-Calif.) and Sen. Ted CruzRafael (Ted) Edward CruzSchumer moves to break GOP blockade on Biden's State picks Bipartisan senators to hold hearing on 'toxic conservatorships' amid Britney Spears controversy GOP senators seek to block dishonorable discharges for unvaccinated troops MORE (R-Texas). There has been some interest in including the tax cut in a second package of tax cuts that the House plans to vote on this fall. However, it was not included in a "Tax Cuts 2.0" outline House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyHouse panel advances key portion of Democrats' .5T bill LIVE COVERAGE: Ways and Means to conclude work on .5T package LIVE COVERAGE: Tax hikes take center stage in Ways and Means markup MORE (R-Texas) released last week.
A second tax package is unlikely to become law this year, since it would need support from some Democrats in the Senate. As a result, some GOP lawmakers, as well as outside conservatives such as Americans for Tax Reform President Grover Norquist, have been pushing for Treasury to issue regulations to index capital gains to inflation.
Mnuchin's comments in the Times story are similar to remarks he made on indexing capital gains to the Wall Street Journal last month. In both instances, he said that Congress should take a look at the issue first.
“Consider that with, obviously, other parts of Tax 2.0,” Mnuchin told the Journal. “If we’re not able to complete Tax 2.0, then we’ll go back to the drawing board and decide whether we want to consider this on a nonlegislative basis.”
Mnuchin told the Times that he hasn't determined whether Treasury can act on its own to make the capital gains tax cut — an issue that is a source of debate.
Conservatives argue that Treasury has the authority to index capital gains due to a 2002 Supreme Court ruling in a telecommunications case that found that the term "cost" was ambiguous. But Democrats disagree that Treasury has the authority to index capital gains by executive action, arguing that the Supreme Court ruling had nothing to do with the tax code and noting that 1992 opinions from Treasury and the Department of Justice found that Treasury did not have the power to take the action.
Democrats also oppose indexing capital gains because it would add to the deficit and largely benefit the wealthy. According to an analysis from the Penn-Wharton Budget Model, indexing capital gains would cost about $100 billion over 10 years, and 86 percent of the benefit would go to those in the top 1 percent of income.