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Trump administration holds tax cut for the rich



The Ministry of Finance is considering a tax cut for the richest Americans through a change that would not require Congressional approval A move that followed a package of tax cuts last year which would benefit even the super-rich.

The agency is investigating whether it will allow capital gains, so-called capital gains, to be adjusted to inflation in some way that protects more of the taxation. Most capital gains are paid by wealthier Americans who hold disproportionately large investment portfolios.

But the use of executive power in such a significant change in tax law would be extremely unusual and could be prone to a legal challenge. Senior administrators have discussed whether to proceed but have not concluded that they have the power to do so. The move was made during the George H.W. Bush administration, because it was seen as outside the jurisdiction of the Ministry of Finance and was only accessible through an act of Congress

The idea was long advocated by the director of the White House National Economic Council, Larry Kudlow, this Drastic measures are usually taken by Congress, not the Ministry of Finance and the Internal Revenue Service. However, Treasury Secretary Steven Mnuchin told the New York Times in an interview that he is considering whether to continue if Congress does not act alone.

"If it can not be done through a legislative process, we'll do it Look at what treasury tools we have to do ourselves, and we'll think about it," Mnuchin told the New York Times. "We are investigating this internally and we are also looking at the economic costs and the impact on growth."

Mnuchin made it clear that he had not decided whether to approve such a change. And he has not determined if he believes the change would be legal, two senior government officials said on condition of anonymity to discuss the internal deliberations.

The Republicans passed a massive tax deduction package last year that lowered the tax rate for all income groups, with big benefits for wealthy Americans and businesses. Despite growing concerns from legislators about the growing budget deficit, earlier this year Trump said Congress would try to pass another package of tax cuts this year, mainly aimed at supporting the middle class. The Republicans of the Senate have not signaled how they want to proceed.

"Once again, Republicans have uncovered the true priorities of their tax fraud: billions in tax credits for the richest at the expense of all others," said minority leader Nancy Pelosi (D-Calif.) Said in a statement. "American families are drowning in stagnant wages, higher healthcare costs, and rising prescription drug costs, but the GOP continues to use its pockets to give 1

percent more to the wealthiest."

Capital gains represent the income someone receives from an investment over time. If an investor buys a stock for $ 100,000 and later sells it for $ 110,000, they will have a capital gain of $ 10,000 and will typically have to pay a tax on that difference. The initial purchase price of $ 100,000 is considered the "cost" of the investment, and the capital gain is determined based on the cost.

Kudlow and others have indicated that the cost should be linked to inflation. Once an investor sells an investment, the capital gain would be lower if this "cost base" is set higher due to inflation. An investor has to pay less taxes.

But any unilateral change could be subject to a court challenge by other groups who want to have their own tax-related concerns regarding inflation. And other groups could sue and say that it is beyond Treasury's area of ​​responsibility to make a court decision that requires Congressional approval.

In September 1992, the Department of Justice stated at the end of the Bush administration that the Ministry of Finance did not have the law authority to unilaterally make the change. She prophesied that the adoption of the change in inflation would be challenged in court without the approval of Congress and that the government would lose the case.

Conservatives have long attempted to lower capital raising taxes, arguing that investors are encouraged to sell stocks and move their money for new investments and help more businesses grow. But these proposals have often stalled in Congress because the changes would disproportionately benefit the wealthiest households.

Researchers estimate that the top five percent of households in terms of income hold about two-thirds of all equity and mutual fund investments that enable richer Americans to benefit much more than others from changes in capital gains rules.

Several Republicans of Congress have introduced plans that would legitimately subject capital gains to inflation, including Senator Ted Cruz of Texas and Rep. Devin Nunes of California. The idea was also widely used by Grover Norquist, the founder of US tax reform and a leading conservative voice in tax cuts.

Steve Moore, a close friend of Kudlow, said there was an active debate within the Treasury to try to unilaterally change the capital gains. Some political leaders support the idea, while career starters are more cautious and know that it has previously been rejected.

"The thing is, Trump is so brave, he's doing so many of these things administratively, and he's the kind of person I could see who would instruct the Treasury Department to do that," Moore said. "That would be huge with the economy … There is a big, robust debate within the Treasury department on whether or not to do this, it's definitely in the mix."

Mark Mazur, a longtime IRS official , who served in a senior role in the Treasury Department of the Obama Administration, said the policy change was studied many years ago and was held outside the bounds of executive authority. Changes of this magnitude should be written by the legislator, said Mazur, not decided by administrative officials.

It is unclear whether the Ministry of Finance could make the decision without providing additional information or whether the Ministry of Justice would need to prepare a legal opinion

Mazur is the director of the Tax Policy Center, which studies tax proposals. It has recently published an analysis of what the indexation of capital gains could mean for inflation, and it turned out that the tax savings could be significant.

Leonard Burman, an institute employee at the center, came up with such a change as it was designed to cut the tax on the wealthiest Americans by as much as $ 20 billion, making it easier for discerning investors to seek tax havens create.

Heather Long and Jeff Stein contributed to this report.


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