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: 996341

Reported Deaths: 16245
CountyCasesDeaths
Marion1343262101
Lake658231151
Allen57160791
Hamilton45963460
St. Joseph43954607
Elkhart35546503
Vanderburgh31975473
Tippecanoe27694256
Johnson24821440
Hendricks23647353
Porter22735362
Madison18538404
Clark18383248
Vigo17274300
Monroe15117197
LaPorte14987249
Delaware14931256
Howard14574286
Kosciusko12166147
Hancock11597175
Bartholomew11447179
Warrick11225188
Floyd10983214
Wayne10840248
Grant9898217
Morgan9361176
Boone8819115
Dubois8210129
Dearborn815492
Henry8107150
Noble7944106
Marshall7786134
Cass7462119
Lawrence7379168
Shelby7115114
Jackson691788
Gibson6480113
Harrison641591
Huntington630299
Knox6269105
DeKalb623796
Montgomery6184109
Miami586595
Putnam573477
Clinton567171
Whitley558055
Steuben550473
Wabash5250101
Jasper520475
Jefferson504695
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Adams472773
Daviess4596112
Scott433968
Greene421196
Wells419787
Clay418460
White414261
Decatur4118101
Fayette402186
Jennings383260
Posey374243
LaGrange352078
Washington352049
Randolph339999
Spencer336442
Fountain331858
Sullivan326652
Starke310868
Owen310169
Fulton304566
Orange290562
Jay278445
Perry264452
Franklin262742
Carroll258232
Rush257232
Vermillion254254
Parke229726
Pike227343
Tipton225659
Blackford187840
Pulaski181155
Crawford158122
Newton155648
Benton150117
Brown144047
Martin137319
Switzerland133911
Warren120116
Union106615
Ohio84012
Unassigned0532

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1494160

Reported Deaths: 23327
CountyCasesDeaths
Franklin1623021662
Cuyahoga1442512412
Hamilton1042291409
Montgomery729771240
Summit607921094
Lucas55462904
Butler50923707
Stark457361053
Lorain34972568
Warren32373369
Mahoning30168672
Clermont27861321
Lake26543434
Delaware23920162
Licking23442283
Trumbull22420552
Fairfield22117241
Greene22014311
Medina21673305
Clark19567349
Richland18260280
Portage17616247
Wood17174220
Allen15672269
Miami15305296
Muskingum14481174
Columbiana13656263
Wayne13538263
Tuscarawas12415298
Marion11760175
Scioto11336154
Pickaway11264141
Erie10613180
Ross10425196
Lawrence9638137
Hancock9504149
Ashtabula9410197
Belmont9086197
Geauga8795157
Jefferson8455191
Huron8193139
Union809156
Washington8009137
Sandusky7677145
Athens767072
Knox7571138
Darke7530151
Seneca7184144
Ashland6776125
Auglaize664896
Shelby6392111
Brown627382
Crawford6159130
Mercer606793
Defiance6059102
Fulton590596
Highland587199
Madison585776
Clinton575190
Logan569092
Guernsey568467
Preble5640121
Putnam5238108
Williams516784
Perry511761
Champaign502971
Jackson495470
Ottawa477886
Coshocton468382
Morrow449056
Pike429962
Fayette420760
Adams409987
Gallia409865
Hardin409276
Van Wert362378
Henry357171
Holmes3549122
Hocking350378
Wyandot316561
Carroll295459
Paulding275145
Meigs257849
Monroe212153
Noble195646
Morgan190132
Harrison177842
Vinton161724
Unassigned05
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