Trump administration considers new $100 billion tax cut on capital gains

David Jackson | USA TODAY

WASHINGTON – The Trump administration is considering a change to tax deduction rules that analysts say would amount to a $100 billion capital gains tax cut for the wealthy.

Aides said Treasury Secretary Steve Mnuchin has not decided whether to pursue a change that would allow Americans to take inflation into account when determining capital gains taxes – and whether the administration could do it unilaterally, bypassing Congress.

"There's been a great deal of interest in this provision for a long time. The treasury is currently evaluating the economic impact to see whether or not it requires any legislation," said White House spokesman Hogan Gidley.

Officials are also looking at how such a change might take effect.

"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 told The New York Times. “We are studying that internally, and we are also studying the economic costs and the impact on growth.”

When a person buys a stock or a house, and later sells it for a profit, they pay taxes on the difference – known as capital gains.

The proposal would enable the seller to apply the inflation rate in the time in which they owned the stock or house, lowering the profit that is subject to taxes.

A budget model published in March by University of Pennsylvania's Wharton business school found that indexing capital gains to inflation would cost the U.S. Treasury $102 billion in tax revenues over the next decade. The study reported that "the top one percent of tax units would receive more than 86 percent of the tax cut, and that after tax-incomes would increase most for the top 0.1 percent."

Democratic lawmakers are demanding congressional review of any move to reduce taxes on capital gains, calling it a giveaway to America's wealthiest taxpayers.

Senate Democratic leader Charles Schumer, D-N.Y., said it is an "outrage" to basically give a tax cut to the wealthy at a time when budget deficits are growing and wages have been flat.

It would also be an outrage for the Trump administration to do it unilaterally, he said.

Mnuchin "thinks he can do it on his own, but everyone knows this must be done by legislation," Schumer said. "If this proposal were to be considered in the Congress, it would not pass.”

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