WASHINGTON, D.C. – Today, U.S. Senator Angus King (I-Maine) sent a letter to Treasury Secretary Steven Mnuchin expressing concern regarding the Treasury Department’s reported proposal to allow capital gains to be indexed to inflation – an action that would occur without Congressional input, and would amount to approximately $100 billion in tax cuts that would primarily benefit the wealthiest Americans. The proposal would also add more than $100 billion to the deficit over 10 years.

“I write to you to express my serious concern over numerous reports that the Administration may consider a proposal from the Treasury Department to issue a rule that would allow capital gains to be indexed to inflation by regulation - without Congressional approval,” said Senator King. “This maneuver would effectively grant an approximately $100 billion tax cut to the wealthiest Americans and comes on the heels of last year’s tax cut, which is causing our federal deficit to balloon to new highs. I urge you to consider indefinitely shelving the proposal and resist pursuing bad policy that simply provides more money to the wealthiest Americans.

“I’m all for commonsense tax reform that benefits hardworking families in Maine and across the country, but this proposal is not that: rather, applying inflation indexing to capital gains would almost exclusively benefit the wealthy. If implemented, 86 percent of the benefits will go to the top 1 percent of American taxpayers, and over two-thirds will go to the 0.1 percent—those who need tax cuts the least.”

Senator King was strongly opposed to the tax bill passed in December, saying after the vote’s passage, “I’m disappointed, and I’m angry, because the American people deserve better.” Senator King has consistently called for a responsible, balanced and long-term approach to addressing our national debt and deficit; in a November floor speech, he warned of the tax bill’s dangerous impact on the national debt, and during a Budget Committee hearing that same month argued against a single-party process for crafting tax legislation, saying that a more thorough process would create a better, bipartisan bill. In 2016, he was named a “Fiscal Hero” by the Campaign to Fix the Debt, a nonpartisan movement to put America on a better fiscal and economic path. 

The full text of Senator King’s letter is available HERE and below:

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Dear Secretary Mnuchin,

I write to you to express my serious concern over numerous reports that the Administration may consider a proposal from the Treasury Department to issue a rule that would allow capital gains to be indexed to inflation by regulation - without Congressional approval. This maneuver would effectively grant an approximately $100 billion tax cut to the wealthiest Americans and comes on the heels of last year’s tax cut, which is causing our federal deficit to balloon to new highs. I urge you to consider indefinitely shelving the proposal and resist pursuing bad policy that simply provides more money to the wealthiest Americans.

I’m all for commonsense tax reform that benefits hardworking families in Maine and across the country, but this proposal is not that: rather, applying inflation indexing to capital gains would almost exclusively benefit the wealthy. If implemented, 86 percent of the benefits will go to the top 1 percent of American taxpayers, and over two-thirds will go to the 0.1 percent—those who need tax cuts the least.

According to a Wharton School of Business budget model, indexing capital gains to inflation would remove $10 billion from annual revenues, resulting in over $102 billion added to the deficit over the next ten years. This estimate does not include any revenue lost by those who would game the system by utilizing tax shelters. Continuing to add to our federal deficit when the Tax Cuts and Jobs Act (TCJA) is pushing it up more rapidly than experts expected is like adding fuel to a fire. Bottom line: We cannot afford to continue piling onto the national debt and passing along the bill for our children and grandchildren to pay.

The legal case supporting unilateral action by the Department to execute this change to the tax code is weak.  A similar action was considered and ultimately rejected in 1992 by President George H.W. Bush’s administration.  The Department of Justice concluded that the Treasury does not have the regulatory authority to index capital gains for inflation – not then, and not now.

I urge you to adhere and respect the 1992 opinion.  Indexing capital gains to inflations would blow an even an even larger hole through the deficit, and for no need or benefit to the vast majority of the American people. I look forward to hearing from you on this issue.