Conservative groups press Trump to reduce capital gains taxes

Conservative groups press Trump to reduce capital gains taxes
© Getty

A group of conservative organizations is pressing President TrumpDonald John TrumpDemocrats' CNN town halls exposed an extreme agenda Buttigieg says he doubts Sanders can win general election Post-Mueller, Trump has a good story to tell for 2020 MORE to take executive action to reduce capital gains taxes, since legislation to cut taxes is unlikely to pass in the new divided Congress.

The group is calling on Trump to index the calculation of capital gains taxes to inflation, which would reduce the amount of money subject to capital gains taxes.

"Taking bold executive action now--without having to go to Congress--will restore confidence in financial markets and help bolster every 401(k), IRA, and 529 plan in America," the group said Tuesday in a letter to Trump.

ADVERTISEMENT

More than 50 organizations signed the letter, including Americans for Tax Reform, the Club for Growth and FreedomWorks.

The letter comes after Democrats took control of the House earlier this month, weakening the prospects for tax-cut legislation. The conservative organizations have been urging Trump to take executive action to index capital gains for some time, since capital gains taxes weren't cut in the president's 2017 tax law. 

"We believe taking inflation out of the tax on savings will be welcomed by investors and will boost the stock market given that a cut in the tax rate on investment was not a part of tax reform," the organizations wrote.

Currently, people pay capital gains taxes on the difference between what they paid for an investment and what they sell it for. But conservatives want people instead to only pay taxes on the difference between what they paid for the investment plus inflation and what they sell it for.

The conservative organizations argue that indexing capital gains amounts to ending taxes on "phantom income." They argue that the current policy doesn't distinguish between the increase in an asset's value that's due to economic growth and the increase that's due to inflation. They also noted that individual income tax brackets are adjusted for inflation.

"Our tax brackets are indexed to inflation for a reason--we don't think a worker who gets a raise that barely keeps pace with inflation should face a tax increase," the organizations wrote. "The same principle should apply to savings."

The conservative organizations argue that Trump has the authority to index capital gains through regulation. However, Democrats dispute the argument that Trump can act unilaterally to reduce capital gains taxes, and they argue that doing so would primarily benefit wealthy taxpayers.

Treasury Secretary Steven MnuchinSteven Terner MnuchinThe Hill's Morning Report - Will Joe Biden's unifying strategy work? Lighthizer, Mnuchin to travel to China for latest round of trade talks On The Money: Treasury misses second Dem deadline on Trump tax returns | Waters renews calls for impeachment | Dem wants Fed pick to apologize for calling Ohio cities 'armpits of America' | Stocks reach record high after long recovery MORE said at an event hosted by The Hill last September that the department would conduct a "thorough analysis" of the issue.