The New York Times on Monday reported that the Trump administration is considering a new $100 billion tax cut for America’s ultra-rich, on top of the already massive windfall they received as part of the Republican tax bill that was signed into law in 2017.
The move would see wealthy Americans able to adjust initial stock purchases for inflation when calculating their subsequent capital gains tax—thereby lowering the ultimate amount owed. Here’s how the Times explained it:
Currently, capital gains taxes are determined by subtracting the original price of an asset from the price at which it was sold and taxing the difference, usually at 20 percent. If a high earner spent $100,000 on stock in 1980, then sold it for $1 million today, she would owe taxes on $900,000. But if her original purchase price was adjusted for inflation, it would be about $300,000, reducing her taxable “gain” to $700,000. That would save the investor $40,000.
The Times quoted Treasury Secretary Steve Mnuchin as saying in an interview at the G20 Summit in Argentina that the administration is looking into whether it can simply enact this latest boondoggle without even having to go through Congress.
“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 said. “We are studying that internally, and we are also studying the economic costs and the impact on growth.”
Capital gains taxes almost entirely benefit of the wealthiest Americans, who, unlike most people, are in a position to actually earn a sizable amount of money from their stock investments. They were left untouched in the GOP’s tax bill—the crowning piece of legislation for Republicans which has since been found by a bipartisan team of Harvard economists to likely amount to a one trillion dollar loss for the country as a whole. Shocking, I know.
This is not the first time adjusting the capital gains tax to account for inflation has been considered by a Republican president. As the Times noted, in 1992, George H.W. Bush’s administration considered—and ultimately rejected—the argument that it could legally index capital gains taxes through regulatory, rather than legislative, action. Trump, however, apparently suffers from no such scruples.