WASHINGTON (Reuters) - The Trump administration came under pressure on Tuesday from both critics and allies over whether it should proceed with another tax cut for investors and do so without consulting the U.S. Congress.
A White House official confirmed that the U.S. Treasury is looking into the possibility of circumventing Congress to protect gains on capital assets from higher tax bills resulting from inflation. The New York Times reported on Monday that such a move could cut capital gains tax revenues by $100 billion.
“There has been a great deal of interest in this provision for a long time. Treasury is currently evaluating the economic impact and whether it can be achieved without legislation,” said White House spokeswoman Lindsay Walters.
Only Congress can change U.S. tax law. But in a move that could be politically explosive in the run-up to the Nov. 6 congressional elections, Treasury officials are trying to determine whether they have the authority on their own to change the way capital gains taxes are calculated.
“At a time when the wealthiest are doing better than ever, to give the top 1 percent another advantage is an outrage,” Senate Democratic leader Chuck Schumer said.
Representative Richard Neal, the top Democrat on tax policy in the House of Representatives, warned that such a move by Treasury would be “legally dubious” and meet with “stiff and vocal opposition” from Democrats.
The 20-percent capital gains tax rate is now applied to the difference between an asset’s value when it is purchased and sold. The calculation does not account for inflation, which can raise tax bills significantly depending on the inflation rate.
The issue has surfaced as House Republicans consider a new election-year tax bill that would make permanent the temporary tax cuts for individuals included in President Donald Trump’s 2017 tax overhaul.
Last year’s tax bill permanently cut the corporate income tax rate to 21 percent from 35 percent, which has hastened the rise of the U.S. federal budget deficit.
House Republican Devin Nunes introduced legislation this month that would adjust capital gains for inflation. But the provision has not been included in the House Republican plan.
No new tax bill can become law without support from Senate Democrats, who want any further tax cuts paid for.
Americans for Tax Reform, a group that advocates for lower taxes and less government, sought to press home its argument in favor of the tax cut on the Trump administration.
“Yes, Treasury has the authority,” the group declared in a release listing top House and Senate Republicans and White House officials as supporters of the effort. “Issue the regulation immediately. As a definitional regulation, this does not require public comment or any time lapse.”
Reporting by David Morgan and Roberta Rampton; Editing by Kevin Drawbaugh and James Dalgleish