Dem chairman says he strongly opposes potential administration action to reduce capital gains taxes

Dem chairman says he strongly opposes potential administration action to reduce capital gains taxes
© Greg Nash

House Ways and Means Committee Chairman Richard NealRichard Edmund NealNY files motion to keep Trump tax returns lawsuit out of DC court Democrats give cold shoulder to Warren wealth tax Senate Dems urge Mnuchin not to cut capital gains taxes MORE (D-Mass.) on Wednesday warned the Trump administration against taking unilateral action to reduce capital gains taxes, as Republicans have stepped up their push for the administration to take such action.

Neal said in a statement that executive action to index capital gains to inflation would largely benefit the wealthy, and that the administration shouldn't bypass Congress to make tax-code changes.

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"If the Trump Administration unilaterally changes the capital gains tax structure, it wouldn’t just be bad policy, it would be executive overreach," he said. "Tax legislation must originate in the House Ways and Means Committee — the President should not circumvent Congress to alter the tax code."

"I strongly oppose the consideration of this action that would undermine our government’s system of checks and balances, further balloon the national debt, and only help the most well-off and well-connected in our country," he added.

GOP lawmakers and outside conservative groups have been pushing the administration to act on its own to index capital gains to inflation, which would reduce the amount of investment gains subject to tax. They argue that the administration has the authority to index capital gains without Congress passing legislation because the administration has the ability to redefine the term "cost."

Under current law, people pay capital gains taxes on the difference between the amount they paid for an investment and the amount they sold it for. If capital gains were adjusted for inflation, people would instead pay capital gains taxes on the difference between the amount they paid for an investment plus inflation and the amount for which they sold the investment.

A group of Senate Republicans, led by Sen. Ted CruzRafael (Ted) Edward CruzTrump moves forward with F-16 sale to Taiwan opposed by China The Hill's Campaign Report: Battle for Senate begins to take shape O'Rourke says he will not 'in any scenario' run for Senate MORE (Texas), sent a letter to Treasury Secretary Steven MnuchinSteven Terner MnuchinTrump phoned bank CEOs as stock market plunged Wednesday: report The Hill's Morning Report — Trump and the new Israel-'squad' controversy Trump pressured Mnuchin on labeling China a currency manipulator: report MORE earlier this week urging Treasury to index capital gains, arguing that it would build on the economic growth the U.S. has experienced following the enactment of Trump's 2017 tax-cut law.

"Implementing a policy of indexing capital gains to inflation will help to perpetuate these successes by encouraging savings, investment, and innovation so that everyday Americans can continue to enjoy better lives and livelihoods," the senators wrote.

But Democrats argue that the administration shouldn't take executive action to reduce capital gains taxes. They say that the administration lacks the authority to do this by executive action and that it would add to the debt and largely benefit the wealthy.

In 1992, the Justice Department's Office of Legal Counsel issued a memo finding that the administration did not have the authority to index capital gains by regulation.

Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyGOP senators call for Barr to release full results of Epstein investigation Trump health official: Controversial drug pricing move is 'top priority' Environmental advocates should take another look at biofuels MORE (R-Iowa) told reporters Wednesday that until the administration determines that it has the legal authority to unilaterally index capital gains, he's not going to say whether he thinks the administration should do so.

The New York Times reported Tuesday that members of the Trump administration are divided on whether to take executive action to index capital gains. The Times reported that National Economic Council Director Larry KudlowLawrence (Larry) Alan KudlowMORE is supportive of the move but Mnuchin is skeptical.

Many of the 2020 Democratic presidential candidates have said they want to increase capital gains tax rates so that investment gains are taxed at the same rates as ordinary income. At Tuesday night's Democratic presidential primary debate, Sen. Amy KlobucharAmy Jean KlobucharPoll: Nearly 4 in 5 say they will consider candidates' stances on cybersecurity The Hill's Campaign Report: Battle for Senate begins to take shape Native American advocates question 2020 Democrats' commitment MORE (D-Minn.) and former Rep. John DelaneyJohn Kevin DelaneyPoll: Nearly 4 in 5 say they will consider candidates' stances on cybersecurity Native American advocates question 2020 Democrats' commitment Head of flight attendants group claims 'broad support' for 'Medicare for All' among union members MORE (D-Md.) both spoke about their desire to raise capital gains taxes.

— Niv Elis contributed to this report, which was updated at 4:30 p.m.