By Rebecca Ballhaus, Alex Leary and Andrew Restuccia
WASHINGTON -- President Trump backed away from pursuing some new
tax cuts to bolster the U.S. economy, a sharp reversal from a day
earlier, when he had described several such measures the White
House was contemplating.
"I'm not looking at a tax cut now," Mr. Trump told reporters on
the South Lawn of the White House after he was asked whether he
would pursue a proposal to cut payroll taxes. "We don't need it. We
have a strong economy."
Mr. Trump also dismissed another idea he floated a day earlier:
lowering capital-gains taxes by indexing gains to inflation. "I'm
not looking to do indexing," he said. "I think it will be
perceived, if I do it, as somewhat elitist...I want tax cuts for
the middle class, the workers." He added that it was an option, but
"not something I love."
On Tuesday, speaking to reporters in the Oval Office, the
president said he had been "thinking about payroll taxes for a long
time" and that indexing was "something I'm thinking about." He
added, "I would love to do something on capital gains."
The whiplash came as the president and his aides have publicly
maintained the economy remains on strong footing despite some
recent warning signs. The president also has been pressuring the
Federal Reserve to cut interest rates at a clip typically only seen
when the economy is severely struggling. On Wednesday morning, Mr.
Trump compared Fed Chairman Jerome Powell to a "golfer who can't
putt."
White House officials, meanwhile, said the administration has
long been examining a range of tax cuts as part of what Republicans
have termed "Tax Cuts 2.0," though no proposals are expected
imminently and such a measure is unlikely to go anywhere in
Congress. One official said indexing capital-gains taxes to
inflation was under discussion long before the president's comments
on Tuesday, adding it was "something we've been wanting to do for
some time now" but that nothing was coming soon.
A senior administration official said the White House hadn't
reversed course on tax cuts in the last day, saying none of the
options the president said he was exploring on Tuesday were being
actively considered. "The president threw it out...but he was just
throwing things out," the official said of a payroll-tax cut.
Other White House aides also expressed frustration with the
president's characterization on Tuesday of his interest in a
payroll-tax cut, which undercut aides who had said such a measure
wasn't under consideration, according to a person close to the
White House.
Some in the White House have expressed concern that talking
about tax cuts sends the signal that there is a problem with the
president's economic policies that needs fixing, which
administration officials strongly reject. Instead, some advisers
have urged the president to focus on blaming the Fed for any
economic issues and arguing for passage of the U.S.-Mexico-Canada
Agreement, which officials think will bolster the economy. Those
concerns predate the president's comments about tax cuts on
Tuesday.
The president's comments came amid a dizzying morning in
Washington, starting with a series of morning tweets and closing
with an impromptu press conference at the White House as he headed
out of town. Standing near the loud, whirring blades of Marine One,
the presidential helicopter, Mr. Trump answered questions from
reporters for more than half an hour in the 90-degree heat.
The president reaffirmed his interest in improved background
checks for gun purchases after days in which he appeared to be
backing off the measure. He also lashed out against the prime
minister of Denmark for rebuffing his interest in buying Greenland,
calling her comments "nasty" and an affront to Americans. Prime
Minister Mette Frederiksen had said any talk of a Greenland sale
was an "absurd discussion."
On immigration policy, he reiterated his interest in an
executive order ending birthright citizenship, a controversial idea
that he floated last year. At one point, he glanced skyward,
declared himself "the chosen one" to take on China. Earlier, he had
tweeted a quote from a conservative author and conspiracy theorist
who said Israel viewed the president as the "second coming of
God."
Mr. Trump's reversal on taxes came amid skepticism from some
economic experts on the idea, as it wasn't clear such a tax cut
would bolster the economy. An analysis by the Tax Policy Center, a
nonpartisan Washington research group run by a former Obama
administration official, found that a lower capital-gains tax rate
doesn't substantially spur economic growth.
On Wednesday, Mr. Trump also appeared to backtrack on whether he
has the authority to unilaterally change the way indexing works,
saying he would need a letter from Attorney General William Barr to
do so. On Tuesday, he said he could do so "directly."
In 1992, when Mr. Barr was also attorney general, the Justice
Department's Office of Legal Counsel concluded that Treasury lacked
the authority to define the word "cost" to include inflationary
gains.
Under current law, investors pay taxes on their nominal capital
gains, meaning that someone who in 1990 bought $100,000 of stock
that is now worth $1 million would pay taxes on $900,000 in capital
gains, even though some of that gain is due to inflation.
White House officials, before the president's comments on
Tuesday that he was considering a payroll-tax cut, had sought to
tamp down expectations for such a measure, saying it wasn't
seriously being pursued. Payroll taxes, which are separate from the
federal income tax, fund Medicare and Social Security, and a
reduction would boost workers' take-home pay.
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 same year-earlier period.
Some 2,000 miles away from Washington, top GOP donors and senior
White House advisers Ivanka Trump and Jared Kushner gathered in
Jackson Hole, Wyo., earlier this week for a retreat arranged by
House Minority Leader Kevin McCarthy (R., Calif.). There, donors --
many of them business executives -- expressed enthusiasm for both a
payroll-tax cut and a reduced capital-gains tax, while voicing some
unease about the president's penchant for tariffs and its effect on
the economy, according to a person who attended the retreat.
At one point, the person said, Mr. Trump called Mr. Kushner, his
son-in-law. On speaker phone, the president told the donors
assembled that the economy was strong and boasted about his
approval rating. Most polls during his presidency have shown
approval for the president remaining below 50%.
Write to Rebecca Ballhaus at Rebecca.Ballhaus@wsj.com, Alex
Leary at alex.leary@wsj.com and Andrew Restuccia at
Andrew.Restuccia@wsj.com
(END) Dow Jones Newswires
August 21, 2019 17:23 ET (21:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.