WASHINGTON—President Trump said the White House is examining proposals to bolster the economy, including reducing capital-gains taxes, while maintaining that growth remains strong.
“We’re very far from a recession,” said Mr. Trump in comments to reporters at the White House.
Mr. Trump said his administration was looking at various tax cuts including a proposal to reduce capital-gains taxes by indexing them to inflation—a move that would disproportionately benefit wealthy Americans. The president also suggested he could impose the indexing change through regulatory action rather than through Congress, saying: “I can do it directly.”
Such a move would likely face immediate court challenges.
Under current law, investors pay taxes on their nominal gains, so someone who bought a stock for $1 million in 1990 that is now worth $10 million would pay taxes on $9 million in capital gains, even though some of that gain is due to inflation.
Allowing taxpayers to adjust their cost basis for inflation might encourage people to sell long-held assets. But it would also reduce taxes by about $100 billion over a decade, according to the Penn-Wharton Budget Model.
Lawrence Kudlow, a top White House economic adviser, has long supported the idea of indexing. But so far, the president hasn’t issued any directives, and the Treasury Department hasn’t proposed any changes. Democrats in Congress have warned that indexing without congressional approval is illegal and would simply benefit old investments without necessarily spurring new growth.
Mr. Trump also said he had thought about a payroll-tax cut for “a long time” but said nothing was imminent on that front.
The comments came as officials said they are discussing a range of tax cuts to propose to Congress. Some in the White House briefly brought up the possibility of a payroll-tax cut, though two people familiar with the matter said they didn’t expect that idea to be pursued, and a White House official said Mr. Trump hadn’t endorsed the proposal.
It isn’t clear that the White House discussions will lead to any new policies. The president and his aides have frequently said they are considering new economic measures, including suggesting new tax cuts ahead of the 2018 elections. No such measures have come to fruition since tax cuts the president signed into law in December 2017.
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Payroll taxes, which are separate from the federal income tax, fund Medicare and Social Security.
Mr. Trump on Tuesday morning tweeted and retweeted praise of the economy—which he hopes to make a central selling point for his re-election campaign—including a tweet by his campaign manager, Brad Parscale, accusing the media of “cheering for the economy to tank.”
Mr. Kudlow, who is director of the National Economic Council, told “Fox News Sunday” that the administration was exploring further tax cuts and also noted a proposal by Florida Sen. Rick Scott to try to reverse the effects of some of the tariffs the U.S. has imposed on Chinese goods. “He said, ‘Look, why don’t we take the tariffs from the China trade and turn those back to the taxpayers in the form of tax cuts?’ ” Mr. Kudlow said of the Republican senator. “That’s an idea.”
It isn’t clear how such a proposal would work, because China doesn’t directly pay U.S. tariffs, which are instead paid by American firms when Chinese goods enter the country. Already, for every dollar brought in by the new tariffs, a dollar has been authorized to rescue programs for U.S. farmers who have been harmed by retaliation from China and other countries. The U.S. government collected $63 billion in tariffs in the year that ended June 30.
Some administration officials have been concerned about the effect of tariffs on the U.S. economy, and economic experts say Mr. Trump’s trade war with China has alarmed Americans about the future of trade and that the changing cost of doing business is causing trepidation about investment.
Mr. Trump is unlikely to reverse tariffs on China, which he has said are helping pressure Beijing in negotiations over a trade deal with the U.S. Last week, however, he opted to back off a Sept. 1 deadline for 10% tariffs on remaining Chinese imports, telling reporters he was doing so to avoid any impact on U.S. shoppers during the holiday season.
The exploration of possible measures to shore up the economy comes as White House officials have publicly said they see no warning signs. Vice President Mike Pence, speaking at the Detroit Economic Club luncheon in Detroit on Monday, criticized “naysayers” for expressing concern about the state of the economy and warned that Democrats would “wreck” the economy.
Democrats have said the president’s economic policies have heightened the odds of a recession, and they have criticized the administration for not improving income inequality in the country.
The economic expansion this summer became the longest on record in the U.S. Unemployment is exceptionally low and consumer spending appears robust, but warning signs are flashing. Growth in economic output slowed to a 2.1% annual rate in the second quarter from a 3.5% annual rate in the second quarter of 2018.
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Business investment and exports both contracted in the latest quarter, possible signs that the corporate sector is being squeezed by global trade tensions. Moreover, financial markets have grown volatile, and the bond market has moved in a way that in the past has signaled recession, with yields on long-term Treasury securities falling below yields on short-term securities.
Mr. Trump, asked whether the White House was preparing for a possible recession, told reporters in New Jersey on Sunday: “I’m prepared for everything.” But, he added: “I don’t think we’re having a recession.”
On Monday, in his latest attack on the Federal Reserve and its chairman, whom he appointed, Mr. Trump called for the central bank to cut its benchmark rate by at least a percentage point—a move that would typically be considered only when the U.S. economy is struggling. Such a rate cut hasn’t happened since the global financial crisis in late 2008.
Later Tuesday, Mr. Kudlow is set to hold a conference call with state and local officials in which he is expected to reassure them about the state of the economy.
—Alex Leary and Jon Hilsenrath contributed to this article.
Write to Rebecca Ballhaus at Rebecca.Ballhaus@wsj.com, Andrew Restuccia at Andrew.Restuccia@wsj.com and Richard Rubin at richard.rubin@wsj.com
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https://www.wsj.com/articles/white-house-officials-try-to-bolster-economy-even-as-they-praise-it-11566321939
2019-08-20 19:35:00Z
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