A White House spokesman suggested Tuesday that President Trump has not ruled out unilaterally cutting taxes by indexing capital gains to inflation, citing general interest in the maneuver.
Trump is not seeking to bypass Congress to enact a tax cut, White House deputy press secretary Hogan Gidley said on board Air Force One while traveling to Tampa, Fla., saying instead that the Treasury Department is reviewing whether the tax cut could be achieved without legislation.
“There’s been a great deal of interest in this provision for a long time,” Gidley added.
Conservatives have pressed Treasury Secretary Steven Mnuchin to index capital gains to inflation for taxation purposes, arguing that the move could be accomplished via regulation without having to involve Congress — effectively implementing a second round of tax cuts by executive fiat.
The action would have the effect of cutting taxes on capital gains by shrinking the size of any gains that the tax would apply to.
Outside groups have speculated that President Trump might be open to such an administrative tax cut as an economic growth measure. The chatter picked up Monday after the New York Times published a front page report on the possibility.
Before joining the White House, top Trump economic adviser Larry Kudlow, former CNBC commentator and Reagan-era economic adviser, called on the president to pursue the tax cut.
Yet it’s not clear that the Treasury would have the legal authority to index capital gains to inflation, and it would inevitably face litigation if it proceeded.
Supply-siders who favor lowering capital gains taxes argue that the measure would boost economic growth by increasing the rewards to investment.
But the incentive would come at a steep fiscal cost, of up to tens of billions of dollars a year. Furthermore, the cuts would accrue mostly to the very high-income earners who own stocks and other assets, subjecting Trump to a new round of criticism that he was giving tax breaks to the rich — this time without even asking Congress.
