The Real Deal New York

Trump is considering a tax break that would be a boon for real estate

Change would index capital gains tax rate to inflation
September 04, 2018 10:01AM

President Donald Trump (Credit: Getty Images)

President Trump is considering a tax break that would link capital gains to inflation.

Such a change would cut tax bills for investors selling real estate or stock by adjusting the original purchase price for inflation. For example, under current law, corporate stock with dividends held for a decade would be subject to a tax rate of 24.3 percent. When indexed to inflation, that rate falls to 21.4 percent, according to estimates by the Congressional Research Service. The exact rate would vary depending on the asset and how long it was held, but regardless, there would be a several percentage point tax deduction.

The change might not sit well with some of Trump’s supporters since more than 63 percent of the break would go to the top .1 percent of taxpayers. And over the next decade, the benefit would cost more than $102 billion, according to the Penn Wharton Budget Model.

“There are a lot of people that love it and some people that don’t,” Trump told Bloomberg on Thursday. “But I’m thinking about it very strongly.”

Trump’s top economic adviser, Larry Kudlow, has pushed for a capital gains change to be included in this proposal. But the Trump administration has floated the idea of going around Congress. In July, Treasury Secretary Steven Mnuchin was looking into ways to index capital gains to inflation without having to get Congress to sign-off on the change.

Meanwhile, House Republicans are mulling whether or not to back-burner a proposed second round of tax cuts that would make aspects of last year’s tax overhaul permanent, including the controversial $10,000 annual cap for state and local tax deductions. [Bloomberg] — Kathryn Brenzel