Unilateral Executive Tax Cuts Could Add Hundreds of Billions to Debt

The Trump Administration is reportedly considering an executive action – at the urging of lawmakers in both the House and Senate – to reduce capital gains taxes by allowing the basis to be indexed to inflation.

This proposal comes in addition to recent rulemaking to limit basis shifting in partnerships and loosen rules around the Corporate Alternative Minimum Tax (CAMT).

Estimates have found that inflation indexing capital gains could reduce revenue by $170 to $950 billion through 2035, depending on if it is applied retroactively, and the other provisions could add tens of billions more to deficits.  

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

We’re already borrowing nearly $2 trillion a year, and the recent loss of tariff revenue threatens to push those deficits up further. The last thing we need is more deficit-financed tax cuts – especially ones enacted by executive fiat.  

With debt approaching record levels and interest expenses exceeding $1 trillion a year, we need more revenue, not less.  

This is neither the time nor the way to do tax cuts. Further tax cuts should come only after the debt is brought back to a manageable level. If either Congress or the President wants to cut something, they should focus on cutting spending, as a means of improving deficits.  

The President should abandon efforts to erode the tax base and ignore calls to go even further. Instead, he should work with Congress to enact meaningful savings and begin to reduce deficits toward 3% of GDP. 

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For more information, please contact Matt Klucher, Assistant Director for Media Relations, at klucher@crfb.org.