President Trump Weighs Lowering Capital Gains Taxes
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Here's your money briefing. I'm J.R. Whalen at The Wall Street Journal in New York. The federal tax rate on capital gains is currently 23.5 percent, but that could be coming down under a plan being considered by President Trump. We'll check in with our Washington bureau for details in a moment. First, some money in market news you should know. There's a plan on the table in Washington that would keep Social Security solvent for at least 75 years. The so-called Social Security 2100 Act, being considered by House Democrats, would also raise benefits. and lower income taxes on those benefits now under current law individuals with income of at least twenty five thousand dollars and married couples with incomes of thirty two thousand dollars must pay income taxes on a portion of their benefits the bill would raise those thresholds to fifty thousand and one hundred thousand dollars
What proposal is President Trump considering to tie capital gains taxes to inflation?
and there are higher taxes involved as well, the plan would immediately begin imposing the tax on wages above $400,000 and increase the tax rate from 6.2% to 7.4% over 25 years. But the plan is a long way from becoming reality, with Republicans currently controlling both the Senate and the White House.
An idea that's been brewing inside the White House to lower capital gains taxes could take some steps forward this week. And Wall Street Journal reporter Kate Davidson is on the line with us from our Washington bureau. So, Kate, President Trump's idea is to tie capital gains taxes to inflation, but he hasn't gotten full support from his economic team. How does he plan to push this plan forward?
Well, that's a little bit unclear. I think that it's sort of widely recognized that the plan is unlikely to gain any traction in Congress. So what the administration is doing, the president and his economic advisors are, I think, looking at and exploring possible alternatives to the extent that this is part of a broader package to look at tax cuts, tax cuts 2.0, as they're sometimes referred to, that sort of a post-election approach. proposal, but it is possible for the administration to take action unilaterally on their own. So I think the meeting today is to explore how they might do that.
So by unilaterally, you mean they could actually just bypass Congress?
What Social Security and tax policy updates are mentioned before the interview?
They could, but there's sort of one big thing standing in their way. And so we're kind of waiting to find out the extent to which this topic is explored at the meeting. And that is this opinion. It's a 1992 opinion from the Justice Department's Office of Legal Counsel that basically concludes that the Treasury Department lacks the authority to do just that. to move on their own so we know that the Treasury is essentially you know they've acknowledged that that this opinion kind of prevents them from acting and we've heard that you know that there there could be you know one one course of action they could take is ask the Justice Department to review the opinion and reconsider it so that might be happening
But we also know that the Treasury Secretary Mnuchin is really not all that keen on this policy idea. So it's kind of waiting to see which side wins out on the argument for actually going ahead with this proposal.
And Attorney General William Barr plays an interesting role here.
That's right. He was actually the attorney general at the time that that earlier opinion was issued. So a little bit unclear what factor that could play in the likelihood of whether this decision gets revised.
Now, capital gains currently face a 23.8% federal tax rate, and people might be encouraged to sell assets if that rate actually comes down.
You know, there's an estimate from the Penn Wharton budget model that says that most of the benefits are going, you know, would go to high-income households for this sort of change. I mean, it would reduce taxes by about $100 billion over a decade. So a pretty significant effect on government revenues there.
Is the reasoning behind the uneasiness or opposition to this idea just based on lower tax revenue?
I think that's part of it.
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