(Alexandria, VA) -- As Congressional leaders and White House officials hammer out negotiations on a stimulus package to boost the nation's sluggish economy, a legal brief sponsored by the research arm of the nation's largest taxpayer group shows that President Bush can act now. The President has the authority to index capital gains taxes for inflation without Congressional approval -- providing immediate relief to millions of Americans, according to the National Taxpayers Union Foundation (NTUF).
The 1992 memorandum, prepared while the former President Bush was in office and facing a similar threat of recession, contends that the real "cost" of assets such as stocks or bonds must be inflation-adjusted in calculating the sale profit to ensure that inflation-caused gains are not taxed. Though the Treasury Department and Congress traditionally have defined "cost" as the asset's original price and a "gain" on the asset's sale as the difference between the original price and the selling price, these definitions are not established law.
"[T]he Treasury has administrative discretion to reinterpret 'cost' to take account of the economic reality that a 'gain' attributable solely to inflation adds nothing to the taxpayer's real wealth or purchasing power," states the memo, co-authored by former Justice Department counsel Charles Cooper for NTUF.
The economy has surged and staggered since the former Bush Administration, but the policy debates -- and NTUF-supported solutions -- have remained the same.
"What was a good idea 16 years ago remains so today," NTUF Vice President for Policy and Communications Pete Sepp said. "The best way to jump-start the economy is through immediate tax relief for American families and businesses. Reducing the tax burden now on individuals and institutions will ensure long-term economic growth later."
NTUF is the nonpartisan research arm of the 362,000-member National Taxpayers Union, a citizen group founded in 1969. Note: For more information on stimulus policies or to view the full paper (PDF), The Legal Authority of the Department of the Treasury to Promulgate a Regulation Providing for Indexation of Capital Gains, visit www.ntu.org.