Tags: Trump Administration | Trump Tax Reform | white house | capital | gains | tax | change

White House Not Actively Weighing Capital Gains Tax Change, Source Says

White House Not Actively Weighing Capital Gains Tax Change, Source Says
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Tuesday, 31 July 2018 01:20 PM

The White House isn’t actively considering the Treasury Department’s push to issue a rule that would slash tax bills for investors who have investment income, according to a person familiar with the discussions.

Treasury Secretary Steven Mnuchin told the New York Times earlier this month that his agency was looking at whether it could sidestep Congress to allow capital gains to be indexed to inflation. The change has appeal to some segments of President Donald Trump’s base, but White House officials are aware it would face an immediate legal challenge and has a narrow chance of being sustained, said the person who requested anonymity.

In another sign that the effort was largely confined to Treasury, White House Chief of Staff John Kelly wasn’t actively seeking the change as of Monday, a White House official said.

The idea of changing the tax treatment of capital gains started generating buzz in March, when Trump’s top economic adviser, Larry Kudlow, said he wanted a second round of tax cuts to include lowering the capital gains rate and indexing the original purchase price of an investment to inflation. The treatment of long-term capital gains was left untouched at 20 percent in the tax overhaul Trump signed in December.

Indexing capital gains to inflation means the original purchase price of say, a stock, would take inflation into account -- effectively making the price higher, and the difference between that and the selling price smaller -- ultimately producing a lower tax bill for investors.

Ryan Ellis, a Republican lobbyist, said one of the issues with Treasury doing this unilaterally is that the administration can’t be that granular, whereas Congress can specify details in a bill.

Conservatives have long advocated for a change to the taxation of capital gains, arguing indexing it to inflation would help to spur the economy because investors would be more inclined to sell their investments and put the money to work elsewhere, rather than holding onto those assets until they die. Democrats argue the move would blow out the deficit and just benefit top earners who are most likely to earn investment income.

If Treasury decides to proceed and issue a rule indexing capital gains to inflation, it’s likely to lead to court challenges from critics who say it gives an unfair advantage to investment income and from those who say it needs Congressional sign off. At the root of the issue is whether Treasury can unilaterally change the definition of cost so taxpayers can use inflation in their calculations.

Last week, House Republicans came out with a two-page outline of their so-called Tax Reform 2.0 legislation, which didn’t mention capital gains. House Ways and Means Chairman Kevin Brady has signaled he’s open to Treasury proceeding on its own. The second phase of tax cuts is viewed as a political exercise that’s unlikely to get enough Senate Democrats on board to pass.

Mnuchin told the New York Times he didn’t know whether Treasury had the authority to act alone. He had previously said in an interview with the Wall Street Journal that he wanted Congress to consider the matter first and see if it could be included in the second round of tax changes.

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The White House isn't actively considering the Treasury Department's push to issue a rule that would slash tax bills for investors who have investment income, according to a person familiar with the discussions.
white house, capital, gains, tax, change
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2018-20-31
Tuesday, 31 July 2018 01:20 PM
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