The Trump administration is exploring the possibility of slashing the tax imposed on investment income absent congressional approval, officials said Monday.
The Treasury Department is considering adjusting the capital gains tax for inflation in order to reduce the amount of income investors are required to pay taxes on. The adjustment, should it be made, is expected to reduce government revenue by roughly $100 billion over the next decade.
“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,” Treasury Secretary Steve Mnuchin said in a Monday interview with the New York Times. “We are studying that internally, and we are also studying the economic costs and the impact on growth.”
The unilateral move was considered by the Bush administration but ultimately dismissed because a determination was made that it was too significant a change to the tax code to be implemented without congressional approval.
While the decision has not been finalized, prominent Democrats have already seized upon the possibility as an example of Republicans’ prioritization of the wealthiest Americans.
“Once again, Republicans have exposed the true priorities of their tax scam: billions in tax breaks for the wealthiest at the expense of everyone else,” House Minority Leader Nancy Pelosi (D-Calif.) said in a statement. “American families are drowning under the weight of stagnant wages, higher health costs and soaring prescription drug costs, but the GOP continues to pick their pockets to give more handouts to the wealthiest 1 percent.”
Many Republicans, however, believe that adjusting the capital gains tax for inflation will encourage investor activity within the U.S. The idea has been embraced by a number of prominent Republican lawmakers as well as chief White House economic advisor Larry Kudlow and Grover Norquist, president of Americans for Tax Reform.
Should the administration pursue the unilateral approach, it will likely draw a legal challenge as previous administration’s determined it was beyond the scope of executive authority.