President Donald Trump has decided against making an end-run around Congress to cut the tax on capital gains by indexing gains to inflation, the White House said Wednesday evening.
The decision was announced after a meeting earlier in the day between Trump and his economic advisers, where they discussed whether to move ahead with the tax break.
"President Trump was thoroughly briefed on the complex economic, legal and regulatory issues, and concluded that at this time he does not feel enough of the benefits will go to the middle class," White House spokesman Judd Deere said in a statement.
Some conservatives who have urged Trump to move forward with the plan said that despite the White House's statement, the proposal is not completely off the table.
The idea isn't "dead," said Ryan Ellis, a conservative tax lobbyist who is pushing for the change. In August, Trump reversed his position several times on whether he was considering the tax change.
It's "not like there is some other tax cut on the table," added Ellis, who is the president of the Center for a Free Economy.
Trump last month floated the idea of indexing capital gains to inflation or cutting payroll taxes as a way to jolt the U.S. economy, which has shown warning signs of a slowdown. But he later said that cutting capital gains taxes would be seen as "somewhat elitist" because it would benefit the wealthy.
Most of the benefits would go to high-income households, with the top 1% receiving 86% of the benefit, according to estimates in 2018 by the Penn Wharton Budget Model. The policy could reduce tax revenue by $102 billion over a decade, the model found.
The idea of cutting the tax on investments contrasts sharply with proposals from Democratic candidates vying to challenge the president next year that are largely aimed at more heavily taxing the wealthy.
As 2020 reelection campaign gets underway, Trump has repeatedly blamed the Federal Reserve for suppressing the U.S. economy and has said his trade war with China has hurt the stock market's performance. But cutting the capital gains tax affects few middle-class taxpayers and would do little to spur economic growth.
Indexing capital gains would slash tax bills for investors when selling assets such as stock or real estate by adjusting the original purchase price so no tax is paid on appreciation tied to inflation.
Trump has said he could allow indexing of capital gains without congressional approval, and that he'd only need a letter from the attorney general saying he had the authority.
"We've been talking about indexing for a long time," Trump said Aug. 20. "And many people like indexing and it could be done very simply."
But a day later, Trump indicated he was disinclined to make the move.
"I'm not looking at doing indexing. And I haven't been seriously looking at it," he said. "It's not something I love."
Revamping capital gains taxes through a rule or executive order likely would face legal challenges, a concern that reportedly prompted former President George H.W. Bush's administration to drop a similar plan.