New Tax Break? Trump Administration Considers Indexing Capital Gains For Inflation
 

New Tax Break? Trump Administration Considers Indexing Capital Gains For Inflation

Think we’re finished with tax breaks in 2018? Not so fast. Hot on the heels of tax cuts from the Tax Jobs and Cuts Act (TJCA), Congress is already looking at another round of changes that they’re calling Tax Reform 2.0. But, like a late-night infomercial, there’s more: The Trump administration is considering a change to the way that we tax capital gains, which some equate to a tax cut. The controversial move wouldn't specifically cut capital tax gain rates but would index the rates for inflation (keep reading, I'll explain more about how it works in a bit).

(You can see the 2018 tax rates here and find out more about tax reform 2.0 here.)

Capital gains taxes were not lowered as part of the TJCA, likely because of the cost and the audience: Lowering capital gains taxes would primarily benefit high-income taxpayers. With Congress already hearing an earful from constituents about cuts targeting wealthy, they were anxious to prove that tax reform would help the middle class.

That doesn’t seem to concern the President. Secretary of Treasury Steven Mnuchin told the New York Times that the White House is contemplating making changes to the way that we tax capital gains worth $100 billion - without Congressional approval. The move is likely to win support from investors, but stoke ire from fiscal hawks who are already worried about a rising federal deficit. The Congressional Budget Office (CBO) predicts that the federal deficit will reach $804 billion for the 2018 fiscal year, a $139 billion increase over last year. The CBO projects that budget deficits will continue to increase, from 4.2% of GDP this year to 5.1% in 2022, a percentage that has been exceeded in only five years since 1946. According to the CBO, the TCJA, the Bipartisan Budget Act of 2018, and the Consolidated Appropriations Act are to blame, since they have “significantly reduced revenues and increased outlays anticipated under current law.” Read more on Forbes.