Senate Dems urge Mnuchin not to cut capital gains taxes

Senate Dems urge Mnuchin not to cut capital gains taxes
© Aaron Schwartz

Forty-two Democratic senators are urging the Trump administration against taking unilateral action to cut capital gains taxes after a group of Senate Republicans last week pressed the administration to do so.

"This unilateral move would almost exclusively benefit the wealthiest Americans, add to the ballooning federal deficit, further complicate the tax code, and ignore longstanding Justice Department policy," the Democrats wrote in a letter Wednesday to Treasury Secretary Steven MnuchinSteven Terner MnuchinTrump says he'll decide on foreign aid cuts within a week Democrats push judge for quick action on Trump tax returns lawsuit Five key players in Trump's trade battles MORE.

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The Trump administration has been considering executive action to reduce capital gains taxes by indexing capital gains to inflation, reducing the amount of investment gains that are subject to taxes.

Twenty-one GOP senators sent a letter to Mnuchin last week urging him to move to index capital gains, arguing that doing so would build on the economic growth seen following the enactment of Trump's 2017 tax-cut law. The move also has the strong support from conservative groups, including Grover Norquist's Americans for Tax Reform.

But Democrats, who all opposed the 2017 tax law, argued in their letter Wednesday that indexing capital gains would exacerbate the fact that the 2017 law is not paying for itself. The Democrats cited an analysis from the Penn-Wharton Budget Model that found that indexing capital gains would cost about $100 billion over a decade and predominantly benefit those in the top 1 percent of income.

The Democrats also said that "the proposal would do little to nothing to boost the economy as it would provide a windfall for existing capital assets rather than incentivize new investment."

Additionally, the Democrats argue that Treasury doesn't have the authority to index capital gains by regulation. The senators said they support a 1992 Justice Department memo that concluded that capital gains couldn't be indexed by regulation, and they noted that Congress has considered but never enacted proposals to index capital gains.

"A major policy change like this one should be considered by Congress through regular order, where it can be weighed against competing priorities, like upgrading our failing national infrastructure, investing in health care or shoring up Social Security," the Democratic senators wrote.

Signers of the letter included Senate Finance Committee ranking member Ron WydenRonald (Ron) Lee WydenWyden blasts FEC Republicans for blocking probe into NRA over possible Russia donations Wyden calls for end to political ad targeting on Facebook, Google Ex-CIA chief worries campaigns falling short on cybersecurity MORE (D-Ore.), Senate Banking Committee ranking member Sherrod BrownSherrod Campbell BrownBank watchdogs approve rule to loosen ban on risky Wall Street trades Dayton mayor assigned extra security following verbal spat with Trump The Hill's Campaign Report: Battle for Senate begins to take shape MORE (D-Ohio), Senate Minority Leader Charles SchumerCharles (Chuck) Ellis SchumerJewish Democratic congresswoman and veteran blasts Trump's 'disloyalty' comments Schumer says Trump encouraging anti-Semites Saagar Enjeti: Biden's latest blunder; Krystal Ball: Did Schumer blow our chance to beat McConnell? MORE (D-N.Y.) and every Democratic senator who is running for president.

House Ways and Means Committee Chairman Richard NealRichard Edmund NealDemocrats push judge for quick action on Trump tax returns lawsuit Trump argues NY tax return case should take place in DC NY files motion to keep Trump tax returns lawsuit out of DC court MORE (D-Mass.) also said in a statement last week that he strongly opposes any potential executive action to index capital gains to inflation.

Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyWhite House denies exploring payroll tax cut to offset worsening economy Schumer joins Pelosi in opposition to post-Brexit trade deal that risks Northern Ireland accord GOP senators call for Barr to release full results of Epstein investigation MORE (R-Iowa) said last week that he's not going to say whether he thinks the administration should index capital gains unilaterally until the administration determines that it has the legal authority to do so.