The president is interested in tying the capital gains tax to inflation, a move endorsed by groups that support cutting taxes. | Carolyn Kaster, File/AP Photo finance Trump again flirts with easing capital gains taxes

President Donald Trump on Friday again flirted with the idea of easing capital gains taxes, after swearing off the idea last week because it could be seen as "elitist."

Trump retweeted an article co-authored by Sen. Ted Cruz (R-Texas) and conservative anti-tax crusader Grover Norquist calling for the capital gains tax to be indexed to inflation, a move that would effectively cut taxes on the sale of assets like stocks. He also shared a tweet from Club for Growth, another conservative group focused on slashing taxes, asking him to index capital gains to inflation.


"An idea liked by many?" Trump asked in his retweet of the Cruz article.

Trump has publicly floated the idea of various tax cut proposals as signs have emerged that the economy could be veering toward a recession. Such a move, which conservatives have pushed for in the past, is still a possibility, a senior administration official said this week, though the official cautioned that nothing immediate was happening.

But Trump has given mixed signals on the matter.

On Aug. 20, Trump told reporters that he had been talking for a "long time" about the idea of indexing capital gains to inflation, and that he "would love to do something on capital gains."

But a day later, Trump said he wasn't seriously looking at indexing, adding that he would be perceived as "elitist" because the tax cut would primarily benefit the wealthy. He said that tax cuts weren’t necessary because “we don’t need it” and the U.S. has a “strong economy.”

A 2018 analysis by the University of Pennsylvania found that the majority of the benefits from indexing capital gains would go to the top 1 percent of earners.

The senior administration official said the White House was being mindful of any perception they were trying to benefit the wealthy, in addition to any impact on the swelling federal deficit.

Trump has generally been enthusiastic about indexing, and he has backers within his administration for taking such a step.

Larry Kudlow, Trump’s director of the National Economic Council, has long called for indexing capital gains rates to inflation. He has maintained in a variety of TV interviews over the last few weeks that cutting capital gains taxes remains on the table as part of a second round of tax cuts that could come before next year's election. Vice President Mike Pence has also supported the idea in the past, authoring a bill on indexing while serving in the House, and budget office director Russ Vought has backed the move as well.

Treasury Secretary Steven Mnuchin, however, is less sold on the idea, and was noncommittal in an interview with Bloomberg last week.

Efforts to peg gains from the sale of investments like stocks, artwork and real estate — which are currently taxed at a lower rate than other income — face one major hurdle in the form of a 1992 opinion by the DOJ’s Office of Legal Counsel that bars the executive branch from indexing on its own.

The White House said last year that Trump had asked the Treasury to look into easing the capital gains tax, though the department has long maintained it does not have the legal authority to alter the tax.

Trump said last week he believed that he could index capital gains unilaterally, “but I would need a letter from the attorney general.”

Apart from the op-ed by Cruz and Norquist, some Republicans in Congress have expressed support for taking some kind of mitigating action as they face the prospect of heading into election season during an economic downturn.

"It would be very constructive to change the capital gains tax and index it for inflation. It makes no sense to impose a tax on … a gain that exists only because you’ve lost purchasing power on your currency,” said Sen. Pat Toomey (R-Pa.), who has expressed worries about the administration’s trade war with China.

Republicans have said they would prefer to enact that change in legislation to give more certainty to the markets and increase business investment, but they acknowledge that Trump would likely need to do it himself.

“We would not be able to pass that obviously through a Democratic House. So we’d need the administration to do that,” Toomey said in an interview this week as Trump weighed the move.

Douglas Holtz-Eakin, a former CBO director who now leads the center-right American Action Forum, argued that “anything that gets done should get done legislatively.”

“The idea that the White House will go ahead and index capital gains to inflation, that’s something I’m not a fan of,” he said in an interview this week.

Daniel Lippman and Burgess Everett contributed to this report.

