When investors sell stocks or other assets that are subject to capital gains, they are taxed on the difference between what they receive for sale and what they originally paid for it. This tax rate is usually 20%, which is lower than the tax rate on their income.
By adjusting capital gains to match inflation, the White House could cut billions of dollars in tax laws for its richest investors a year.
For example, if an investor purchased $ 1
This study estimated that 86% of this benefit would go to the richest 1% of the nation, with more than 60% to the top of a tenth of 1%.
Households Over $ 500,000 A Year According to Lars Larry Kudlow, who joined the US government in March as director of the National Economic Council, he has long been an advocate of the president, taking unilateral action. to index capital gains. And conservative groups such as the Americans for tax reform led by Grover Norquist have long argued for a presidential action to index capital gains. Mnuchin told the Times that the Trump administration is considering whether to take unilateral action – without waiting for the congress.
"If it can not be done through a legislative process, we'll look at what tools we need to do in the Treasury and we'll take that into account," he told the newspaper.
But in 1992 the Treasury Department under Republican President George HW Bush wondered if they had the power to index capital gains, and decided that Congress would intervene to effect the change. Although such legislation would have substantial support among Congressional Republicans, including Kevin Brady, chair of the Ways and Means Committee, which writes tax laws, such a change by Congress could be extremely difficult as the Democrats have enough seats in the Senate to Block Them
Proponents of the change argue that they would give new impetus to economic growth by inducing investors to sell assets they hold due to the tax cuts they face. But a July report by the bipartisan Congressional Research Service called this claim into question.
"It is unlikely, however, that any significant or any impact on economic growth would come from a stand-alone indexing proposal," the group said in its report