On Friday, President Donald Trump used his favorite public platform to hint at a policy change that his administration has been weighing for at least a year: using presidential power to unilaterally lower taxes for investors.
On Twitter, Trump linked to an op-ed by Sen. Ted Cruz and veteran anti-tax crusader Grover Norquist calling on the administration to index capital gains to inflation. Currently, they explain, if you bought a share of stock in 1998 for $30 and sold it this year for $40, that would count as $10 in long-term capital gains for federal tax purposes. But adjusted for inflation, $30 in 1998 is about $46.79 now, so you’d be paying taxes on an investment that, adjusted for inflation, lost money.
That’s the basics of the case in favor of the change: taxing inflation is, proponents of the shift argue, unfair, and hurts the economy by discouraging investment. The case against indexing to inflation is much simpler: This is a change that would overwhelmingly benefit the richest Americans, who own an overwhelming share of the stocks, real estate, and other capital whose sales would be affected. One estimate finds that 86.1 percent of the benefit would go to the richest 1 percent.
More concerning still, some legal scholars believe that executing this change through the executive branch is illegal, and that congressional action would be necessary to do this — action that, with Democrats in control of the House, will probably never come.