Senate Minority Leader Chuck Schumer has accused Sen. Ted Cruz and his Republican colleagues of trying to "break the rules" and secure another tax cut for America's wealthiest individuals and corporations via the "back door."
Cruz of Texas and 20 other Senate Republicans wrote to the Treasury this week, urging it to remove inflationary gains from its calculation of capital gains tax liability. The GOP senators argued that this "punishes taxpayers for the mere existence of inflation and is inherently unfair."
They pressed the Treasury to use its executive authority, bypassing Congress, to change the methodology. They claimed the move would encourage investment, spurring on further economic growth in the wake of the Trump administration's $1.5 trillion tax cuts in 2017.
"After showering big corporations and the ultra-wealthy with massive tax cuts, it's unbelievable that Republicans are seeking to break the rules and use a back-door way to give them even more," Schumer, a New York Democrat, told Newsweek.
"We need to make the tax code more progressive to help the working people of this country, not more tax giveaways to the few at the top."
Cruz's letter states that, according to the Tax Foundation think tank, changing the capital gains tax calculation would add around $22 billion in value to the American economy in the long run, "a gain that would be realized by American workers through more jobs and higher wages."
The Treasury Secretary Steve Mnuchin has said there is "no commitment" either way on indexing capital gains to inflation, Bloomberg reported, after Democratic lawmakers wrote to him questioning the legality of using executive powers to make such a change.
"We urge you to reject reported plans to use questionable authority to—yet again—lavish tax cuts upon our country's wealthiest, while middle-class families and working people continue to see costs rise and wages stagnate," wrote Senator Sherrod Brown of Ohio, whose letter was signed by 12 other Democratic senators.
"The proposed change of indexing the basis price would... overwhelmingly benefit the wealthiest of the wealthy. According to the Penn-Wharton Budget Model, this change amounts to a $102 billion tax cut, 86 percent of which flows to the top 1 percent of taxpayers."
"On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy," the report stated. "Although growth rates cannot indicate the tax cut's effects on GDP, they tend to rule out very large effects, particularly in the short run."
Moreover, the report said that while investment grew significantly, it was not in the direction or size anticipated from the incentives created by the tax changes: "This potential outcome may raise questions about how much longer-run growth will result from the tax revision."
One clear impact of Trump's tax cuts is on the federal budget deficit. The Trump administration argued that the tax cuts would eventually pay for themselves by increasing economic activity. But the deficit is bloating.
Congressional Budget Office data shows that the deficit has grown from 3.3 percent of GDP in 2016, when President Trump took office, to 3.9 percent of GDP in 2018. This year, it is forecast to hit 4.2 percent.
Meanwhile, America's public debt pile is stacking ever higher. In 2016, it was $14.17 trillion. By 2018, it had reached $15.75 trillion and this year it is predicted to surpass $16.62 trillion.