The Treasury Department is considering a tax cut for the wealthiest Americans through a change that would not need approval from Congress, officials said, a move that would follow a package of tax cuts last year that also benefited the super-rich.
The agency is studying whether to allow investment income, known as capital gains, to be adjusted for inflation in a way that shields more of it from taxation. Most capital gains are paid by wealthier Americans, who disproportionately hold large portfolios of investments.
But the use of executive power on such a significant change to the tax law would be highly unusual and could be vulnerable to a legal challenge. Senior administration officials have discussed whether to proceed but have not concluded they have legal authority to do so.
The move was rejected during the George H.W. Bush administration because it was seen as outside the scope of the Treasury Department’s authority and only attainable via an act of Congress.
The idea has long been advocated by White House National Economic Council Director Larry Kudlow, but tax changes this drastic are typically made by Congress, not the Treasury and Internal Revenue Service. Still, Treasury Secretary Steven Mnuchin told the New York Times in an interview that he was reviewing whether to move ahead if Congress doesn’t act on its own.
“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,” Mnuchin told the newspaper. “We are studying that internally, and we are also studying the economic costs and the impact on growth.”
Mnuchin made clear that he had not decided whether he would approve such a change. And he has not determined whether he believes that the change would be legal, two senior administration officials said, speaking on the condition of anonymity to discuss the internal deliberations.
Republicans passed a massive package of tax cuts last year that lowered the tax rate for all income groups, with big benefits going to wealthy Americans and businesses. Despite mounting worries from lawmakers about the growing federal deficit, Trump said earlier this year that Congress was going to try to pass another package of tax cuts this year that would be largely targeted at helping the middle class.
“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-San Francisco) 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.”
Capital gains represents the income someone receives from an investment over time. If an investor buys a stock for $100,000 and sells it later for $110,000, they have a capital gain of $10,000 and typically must pay a tax on that difference.