Treasury Secretary Steven Mnuchin said in an interview with The Wall Street Journal that he thinks Congress should take the lead on indexing capital gains to inflation, remarks that come as conservative groups say executive action is needed.
House Republicans are interested in pursuing a second tax-cut package this year, and Mnuchin said Congress should first look at indexing capital gains as part of those efforts, before Treasury considers whether it wants to take action on its own.
“Consider that with, obviously, other parts of Tax 2.0,” Mnuchin told the Journal. “If we’re not able to complete Tax 2.0, then we’ll go back to the drawing board and decide whether we want to consider this on a nonlegislative basis.”
Taxpayers pay capital gains taxes on the difference between what they purchased an asset for and what they sold it for. But prominent conservatives, such as Americans for Tax Reform President Grover Norquist, want taxes only on the difference between the cost of purchasing the asset, plus inflation, and the amount at which the investment was sold.
Indexing capital gains to inflation would reduce the amount of tax people pay when they sell investments, and conservatives ague that would also help boost the economy. They argue that a 2002 Supreme Court ruling gives the Treasury Department the authority to index capital gains through regulation.
But Democrats disagree, saying 1992 opinions from the agency and the Department of Justice show that the Treasury Department does not have that power. They also argue that cuts to capital gains taxes would likely benefit the wealthy the most and increase the federal deficit.
Mnuchin told the Journal that the Trump administration doesn’t have a policy position on indexing capital gains, and he wouldn’t say whether he thinks the Treasury Department has the authority to do so by regulation.
“There’s obviously a benefit to taxpayers because it lowers the tax,” he said. “There’s obviously a revenue impact associated with that.”