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Romans fact-checks Trump's economy claims

CNN's Christine Romans breaks down what factors are boosting economic growth under President Trump and whether or not they are sustainable.

Posted: Aug 2, 2018 6:50 PM
Updated: Aug 2, 2018 7:09 PM

For years, many Republicans and anti-tax advocates have pushed for a change to the way that investment taxes are calculated.

They may get their wish. Steven Mnuchin told the New York Times that the administration is considering whether it can use its regulatory powers to let investors account for the effect of inflation when calculating how much their investments have grown. Treasury is evaluating the economic impact and the process through which it can be achieved, according to a Treasury spokesperson.

When investors sell stocks or other assets subject to capital gains, they are taxed on the difference between what they receive for the sale and what they paid for it originally. That tax rate is usually 20%, which is lower than the rate people are taxed on their income.

By adjusting capital gains to adjust for inflation, the White House could cut the tax bills for the nation's wealthiest investors by billions of dollars a year.

For example, if an investor bought $100,000 of stock in 1987 right after the stock market crash that year, that stock could easily be worth about $1.4 million today. The tax would be calculated on the $1.3 million gain, which would mean the investor would owe more than $250,000 in capital gains taxes if he or she sold the stock. But adjusting for inflation, a process known as indexing, the original $100,000 cost of the stock would be estimated to be more than $200,000, saving the taxpayer more than $20,000 in taxes.

All of those savings would add up. The lack of indexing increased tax collections by $34 billion in just the most recent fiscal year, according to an estimate cited by the Congressional Research Service.

The sale of stock that would otherwise not take place would lead to some increase in tax collections should indexing be put in place. But even with those additional sales, the net effect of indexing would be a $102 billion reduction in tax collections over a 10-year period, according to a study at the University of Pennsylvania Wharton School of Business.

That study estimated that 86% of that benefit would go to the nation's wealthiest 1%, with more than 60% going to the top one-tenth of 1%.

Households with income of more than $500,000 a year are in the top 1%, according to the IRS.

Larry Kudlow, who joined the administration as director of the National Economic Council in March, is a long-time advocate of the president taking unilateral action to index capital gains. And conservative groups such as Americans for Tax Reform led by Grover Norquist, also have long advocated presidential action to index capital gains. Mnuchin told the Times the Trump administration is considering whether to take unilateral action -- without waiting for Congress to act.

"If it can't get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we'll consider that," he told the paper.

But in 1992 the Treasury Department under Republican President George H.W. Bush looked at whether they had the power to index capital gains and decided it would take Congressional action to make the change. Although such legislation would have substantial support among Congressional Republicans, including by Kevin Brady, chairman of the House Ways and Means committee which writes tax bills, passing such a change through Congress could be extremely difficult since Democrats have enough seats in the Senate to block such a move.

Advocates of the change argue it would give a fresh jolt to economic growth by freeing investors to sell assets they are holding because of the tax bite they would face. But a report from the nonpartisan Congressional Research Service in July questioned that claim.

"It is unlikely, however, that a significant, or any, effect on economic growth would occur from a stand-alone indexing proposal," the group said in its report.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 441935

Reported Deaths: 5885
CountyCasesDeaths
Hennepin918591461
Ramsey39405729
Dakota32551324
Anoka30638354
Washington19827221
Stearns17686184
St. Louis13453237
Scott1178693
Wright11485101
Olmsted1024870
Sherburne812364
Carver686636
Clay643278
Rice595266
Kandiyohi551069
Blue Earth533833
Crow Wing476573
Otter Tail449860
Chisago446331
Benton414885
Winona383946
Douglas370366
Nobles364646
Mower358026
Goodhue340757
Polk326754
McLeod321644
Morrison308743
Beltrami305746
Lyon298735
Itasca281143
Becker279438
Isanti279440
Carlton276942
Steele26879
Pine263813
Freeborn237219
Todd230029
Nicollet222136
Brown212334
Mille Lacs211645
Le Sueur206515
Cass203823
Meeker197433
Waseca187515
Martin168226
Wabasha16712
Roseau164916
Hubbard146937
Redwood138527
Renville136139
Houston133213
Dodge13134
Chippewa130632
Cottonwood125118
Fillmore12084
Wadena118214
Rock108511
Sibley10757
Aitkin106633
Watonwan10548
Faribault103214
Kanabec96818
Pennington95915
Pipestone92522
Yellow Medicine92514
Murray8585
Jackson84510
Swift82617
Pope7355
Marshall70115
Stevens6968
Clearwater68114
Lac qui Parle65216
Lake62215
Wilkin6179
Koochiching57910
Lincoln4771
Big Stone4513
Unassigned43568
Grant4247
Norman4218
Mahnomen4077
Kittson36619
Red Lake3154
Traverse2433
Lake of the Woods1741
Cook1130

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 300884

Reported Deaths: 4197
CountyCasesDeaths
Polk44949440
Linn17563269
Scott15228161
Black Hawk13552228
Woodbury12896175
Johnson1191749
Dubuque11229148
Pottawattamie8863112
Dallas874169
Story857433
Webster464768
Cerro Gordo458766
Sioux452451
Clinton445461
Warren430637
Marshall424561
Buena Vista389029
Muscatine382275
Des Moines377340
Plymouth347967
Wapello336796
Jasper315955
Lee310828
Marion298852
Jones268949
Henry262130
Carroll252233
Bremer240048
Crawford227622
Boone214116
Washington213531
Benton207543
Mahaska189936
Jackson189631
Tama184757
Dickinson183225
Delaware171136
Kossuth169241
Clay165319
Wright161724
Fayette157022
Buchanan156920
Hamilton156828
Hardin153129
Harrison152961
Winneshiek150819
Clayton149848
Cedar149119
Butler145423
Page143115
Floyd137236
Cherokee137125
Mills135216
Lyon133132
Poweshiek131024
Hancock127924
Allamakee125927
Iowa122122
Calhoun12159
Jefferson118623
Grundy118522
Winnebago117229
Madison11639
Mitchell114634
Louisa113729
Cass111741
Chickasaw110111
Sac110115
Emmet109931
Appanoose108838
Union107922
Humboldt103919
Guthrie102124
Shelby101026
Franklin99818
Unassigned9370
Palo Alto8969
Keokuk84225
Montgomery82722
Howard81119
Monroe79918
Pocahontas77211
Clarke7717
Ida73530
Greene6837
Davis68221
Adair68120
Lucas6458
Osceola6349
Monona62316
Taylor5889
Worth5873
Fremont5005
Van Buren49112
Decatur4744
Ringgold4229
Wayne41321
Audubon4118
Adams2923
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