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 MnuchinFurious Republicans prepare to rebuke Trump on Syria White House officials stand by Syria withdrawal, sanctions delay amid bipartisan pushback Trump: Treasury 'ready to go' on sanctions against Turkey: 'Stay tuned' 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 WydenDemocrats urge Rick Perry not to roll back lightbulb efficiency rules Bipartisan senators want federal plan for sharing more info on supply chain threats PhRMA CEO warns Pelosi bill to lower drug prices would be 'devastating' for industry MORE (D-Ore.), Senate Banking Committee ranking member Sherrod BrownSherrod Campbell BrownBlood cancer patients deserve equal access to the cure Trump admin abruptly delays funding for human trafficking victims: report Overnight Energy: Lawmakers show irritation over withheld Interior documents | Republican offers bipartisan carbon tax bill | Scientists booted from EPA panel form new group MORE (D-Ohio), Senate Minority Leader Charles SchumerCharles (Chuck) Ellis SchumerTrump defends 'crime buster' Giuliani amid reported probe Louisiana voters head to the polls in governor's race as Trump urges GOP support Trump urges Louisiana voters to back GOP in governor's race then 'enjoy the game' MORE (D-N.Y.) and every Democratic senator who is running for president.

House Ways and Means Committee Chairman Richard NealRichard Edmund NealCBO: Pelosi bill to lower drug prices saves Medicare 5 billion Mexican president urges Pelosi to get USMCA trade deal approved On The Money: Judge tosses Trump lawsuit over NY tax return subpoena | US, Japan sign trade deals | Trump faces narrowing window for trade deals | NBA sparks anger with apology to China 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 GrassleyPhRMA CEO warns Pelosi bill to lower drug prices would be 'devastating' for industry GOP requests update on criminal referrals prompted by 2018 Kavanaugh probe On The Money: Judge tosses Trump lawsuit over NY tax return subpoena | US, Japan sign trade deals | Trump faces narrowing window for trade deals | NBA sparks anger with apology to China 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.