A White House spokesman declined a request for clarification on the meaning of the president’s tweet. Trump also retweeted an op-ed, written by Sen. Ted Cruz (R-Tex.) and anti-tax advocate Grover Norquist, pushing the administration to back the plan to index capital gains to inflation.
The comments add to the confusion surrounding the Trump administration’s position on the capital gains proposal and his tax plans more generally. Last week, Trump appeared to confirm that indexing capital gains to inflation could be done without the approval of Congress, telling reporters: “Many people like indexing, and it could be done very simply. It could be done directly by me.”
But the next day, Trump appeared to back down, telling reporters: “I’ve studied indexing for a long time and I think it will be perceived — if I do it — as somewhat elitist. I don’t want to do that … I think indexing is really probably better for the upper-income groups.”
The capital gains tax cut would let investors who are selling assets, such as a stock or a home, use the inflation-adjusted value of their initial purchase when making the sale. The higher initial price would reduce the taxable income from their sale of the asset, reducing the amount they pay in taxes.
The Trump administration is looking to bolster the economy amid fears of a slowdown from the trade war with China. But a number of economists have argued the capital gains tax cut would do little to stimulate new spending or generate additional growth, because it primarily would cut the amount that rich people pay in taxes. Tax cuts for the poor or middle class tend to have greater stimulative effects, because those groups spend the money, boosting economic activity.
A report by the Center on Budget and Policy Priorities, a left-leaning think tank, found that 86 percent of the benefits of indexing capital gains to inflation would flow to the richest 1 percent of Americans.
Last week, Trump also said he was considering a payroll tax cut — which would help more middle-class workers — and then opposed the idea the next day. And then later in the week he promised a big middle-class tax cut if Republicans retook the House of Representatives next year, but he hasn’t explained how he would do it.
The push from the president’s allies may revive the capital gains proposal. The plan has been backed by Larry Kudlow, the president’s top economic adviser, and Russell Vought, acting director of the White House Office of Management and Budget.
It is also not clear whether the administration has the legal authority to pull off such a maneuver on its own. In 1992, during the George H.W. Bush administration, the Justice Department’s Office of Legal Counsel said in a memo that “Treasury does not have legal authority to index capital gains for inflation by means of regulation.”
It is also unclear what kinds of assets would be subject to the change, which could apply to stocks, homes and other kinds of investments.
“It gets very complicated very quickly both as an economic and legal matter,” said Steve Rosenthal, a tax expert at the Tax Policy Center, a nonprofit think tank. “It’s very difficult technically to pull off without creating a whole bunch of tax shelters and inefficiencies.”