Menu
Tax Notes logo

Top Trump Officials Disavow Unilateral Capital Gains Tax Cut

Posted on Aug. 13, 2020

Any capital gains tax cut would happen with the consent of Congress, not via executive fiat, top White House officials said August 12.

Both Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow affirmed that President Trump’s suggestion of a capital gains tax cut earlier in the week would go through Congress, rather than follow in the footsteps of executive actions taken August 8. “We do need legislation to do what we want on that front,” Mnuchin said.

Kudlow told reporters at the White House later in the day that “I stand with the secretary on that” when asked if a capital gains tax cut would come through another executive action. “It’s not part of an executive order,” he said.

Instead, Trump’s mention of a middle-income tax cut and further business tax cuts were resurrecting the president’s earlier call for a “Tax Cuts 2.0” legislative effort that he would advocate if reelected, according to Kudlow.

In 2018 Trump suggested he might sign an executive order to bypass Congress and unilaterally index capital gains to inflation, before ultimately deciding against it. But after the president signed the multiple memoranda taking aggressive executive action in response to gridlocked congressional negotiations over another coronavirus relief package, some observers wondered whether Trump was suggesting he might try to resurrect the idea of indexing capital gains via executive order.

Making the Case

Kudlow and Mnuchin both sought to contrast their tax priorities with those of presumptive Democratic presidential nominee Joe Biden.

“The president is a tax cutter, in direct contrast to the Biden team, which are tax raisers,” Kudlow said. Biden’s campaign is proposing a nearly 50 percent top rate on capital gains, whereas Trump is seeking to reduce the capital gains rate to 15 percent, he said.

“Fifteen percent gets you a roaring recovery. Fifty percent gets you a stagnant economy for as far as the eye can see,” Kudlow said.

Mnuchin also argued that a capital gains tax cut would be better suited to the current economic situation. Past reductions in the capital gains tax rate “stimulated tremendous investment in our economy,” and for the foreseeable future, to aid the recovery from the pandemic, the rate should be reduced once again, he said.

However, some observers have cautioned that a capital gains tax cut would be less than ideal as a response to the widespread economic downturn, and would primarily provide a windfall to wealthy taxpayers.

Erica York of the conservative-leaning Tax Foundation said in a May 6 blog post that reducing the capital gains rate by 20 percent “would provide a negligible increase to economic growth,” at least compared with other, preferable tax policies like permanent full expensing and a neutral cost recovery system for buildings and factories.

Follow Jonathan Curry (@jtcurry005) on Twitter for real-time updates.

Copy RID