Officials consider reducing taxes on wealthy


Associated Press

WASHINGTON

The Trump administration is studying the idea of implementing a big tax break for wealthy Americans by reducing the taxes levied on capital gains, but no decision has been made yet on whether to proceed.

Administration officials said Tuesday that Treasury Secretary Steven Mnuchin prefers deferring to Congress. But he does have his department studying the economic impact of such a change and the legality of proceeding without congressional approval.

The change would involve taxing capital gains – profits on investments such as stocks or real estate – after taking into account inflation, which would lower the tax bite. Capital gains taxes are currently determined by subtracting the original price of an asset from the price at which it was sold and taxing the difference without adjusting for inflation.

For example, a stock purchased in 1990 for $100,000 and sold today for $300,000 would produce a $200,000 capital gain. That amount, taxed at the top capital gains rate of 23.8 percent, would result in a tax bill of $47,600. However, if the $200,000 gain was trimmed to just $103,000 by adjusting for inflation over the past 28 years, the tax bill would be $24,514.

“There has been a great deal of interest in this provision for a long time,” said a White House official who spoke on condition of anonymity to discuss internal policy deliberations. “Treasury is currently evaluating the economic impact and whether it can be achieved without legislation.”

Indexing capital gains for inflation would reduce federal revenue by about $102 billion over a decade, according to the Penn-Wharton Budget Model.

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