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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 7:48 PM
Updated: Aug 2, 2018 8:09 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.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 751242

Reported Deaths: 13795
CountyCasesDeaths
Marion1032931788
Lake556911009
Allen41692692
St. Joseph36990565
Hamilton36588417
Elkhart29398461
Tippecanoe22901226
Vanderburgh22556400
Porter19356325
Johnson18471389
Hendricks17682317
Clark13226195
Madison13149344
Vigo12614253
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Monroe12207176
Delaware10966198
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Kosciusko9630121
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Bartholomew8169157
Warrick7860156
Floyd7811180
Grant7242179
Wayne7162201
Boone6966103
Morgan6761141
Dubois6218118
Marshall6209116
Cass6016110
Henry5900110
Dearborn589878
Noble581488
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Shelby501496
Lawrence4742122
Gibson444894
Clinton442355
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Montgomery438090
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Steuben400159
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Scott270156
Clay267148
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Union72810
Ohio57911
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Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1108736

Reported Deaths: 20166
CountyCasesDeaths
Franklin1287201467
Cuyahoga1157922211
Hamilton813971250
Montgomery525481043
Summit484271001
Lucas43353820
Butler39013606
Stark33332929
Lorain25672505
Warren24591303
Mahoning22370603
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Licking16662222
Fairfield16574204
Trumbull16548482
Medina15610271
Greene15281248
Clark14237306
Wood13292200
Portage13251215
Allen11913239
Richland11605211
Miami10849225
Wayne9141223
Columbiana9032230
Muskingum8906135
Pickaway8663122
Tuscarawas8649250
Marion8642138
Erie8056165
Ashtabula7160179
Hancock6998132
Ross6944161
Geauga6838151
Scioto6534106
Belmont6157174
Union584549
Lawrence5731102
Jefferson5678158
Huron5546122
Sandusky5442126
Darke5420129
Seneca5348128
Washington5319109
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Auglaize502187
Mercer487385
Shelby476895
Knox4571112
Madison444266
Ashland435797
Putnam4336103
Defiance432399
Fulton432074
Crawford4037110
Brown402461
Logan387677
Preble3855105
Clinton379166
Ottawa373681
Highland359665
Williams348278
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Guernsey324953
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Perry297350
Morrow291840
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Van Wert247264
Adams243256
Pike242835
Gallia240650
Wyandot234556
Hocking220563
Carroll197348
Paulding176542
Meigs148440
Monroe136344
Noble136239
Harrison114138
Morgan109624
Vinton85517
Unassigned03
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