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Trump signals support for indexing capital gains

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Via Fox Business

President Trump once again raised the possibility of indexing capital gains to inflation on Friday, despite dismissing the idea as “elitist” one week ago.

Trump retweeted a pair of messages — one from Forbes Media Chairman Steve Forbes, who’d shared an op-ed co-authored by Republican Sen. Ted Cruz — pressing for the U.S. to index capital gains to inflation

“An idea liked by many?” Trump added on top of the tweet.

In the op-ed, Cruz and co-author conservative economist Grover Norquist argue that eliminating the so-called inflation tax would help keep the 11-year economic expansion afloat.

“Over the longer term, a capital gains tax cut spurs the growth of new businesses, increases the wages of workers, enhances consumer purchasing power, and grows the economy at large, resulting in more overall gains to be taxed,” they wrote.

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“We agree, and we urge the administration to do just that.”

Moments later, Trump shared a second tweet from Club for Growth, a conservative organization that’s focused on cutting taxes, calling on him to index capital gains to inflation.

A capital gain is the profit from the sale of stock or real estate; indexing capital gains would lower tax bills for investors who are selling by adjusting the original purchase price of the item in line with inflation.

For instance, if an individual purchased a share for $100 in 2000 and sold that item 18 years later for $200, the nominal capital gain would be $100, according to the Tax Foundation. But inflation over that same time period would have increased the price level by 49 percent. Under an indexing proposal, the original selling price would increase to $149 — meaning the individual would only pay tax on $51, instead of the full $100.

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Trump flirted with lowering capital-gains taxes by indexing gains to inflation last week after a flurry of worrisome economic activity, including the inversion of the spread between two-month and 10-year Treasury yields, an occurrence that’s historically preceded recessions.

“Indexing is something that a lot of people have liked for a long time,” Trump said last week. “It’s something that would be very easy to do. It’s something that I am certainly thinking about.”

However, he backed away from the measure one day later.

“Indexing is better support for upper-income groups,” Trump told reporters outside the White House last Wednesday.

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Indexing capital gains taxes would do very little to actually spur economic growth, according to the Tax Foundation. Only the top 1 percent of taxpayers would see their after-tax income increase with an increase of 0.83 percent.


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