In The New York Sun, Stephen Moore makes the case for President Donald Trump indexing the capital gains tax to inflation. He writes:

Presidents dating back to George H.W. Bush have toyed with the idea of an executive order to end this unjust inflation tax. Lawyers have always talked them out of it.

Yet Mr. Trump has proven time and again that he goes boldly where previous presidents wouldn’t. When the flocks of starch-white-shirt legal eagles and the tenured swampy political pros advise no, he routinely responds: Why not?

Mr. Trump could order the Treasury Department to properly define a “capital gain” as any increase in the value of a stock or property AFTER INFLATION ADJUSTING from the time of the purchase of the asset to the time of the sale.

In that case, the real rate of tax on capital gains would fall, and investment would rise. And tax revenues would RISE.

We have decades of evidence that when the tax on capital gains is lowered, the government gets more revenue. Under current law, the best way to avoid paying ANY capital gains tax is to hold on to the asset for as long as possible.

This is called the “lock-in effect of the cap gains tax.” Investors refuse to sell old stocks not because they expect a higher rate of return but to avoid paying the tax penalty.

Inflation-adjusting the tax would instantly inspire a selling of old assets and then inject potentially hundreds of billions of dollars of fresh capital into promising entrepreneurial startups that could grow and expand to be the next generation of Microsoft, Nvidia, or Walmart.

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