WASHINGTON — White House officials have explored whether President Trump has the power to sidestep Congress and unilaterally cut a broad swath of taxes as the president looks for ways to inject fuel into a slumping economy, according to a senior administration official.
While such a move is not imminent, Mr. Trump’s advisers have sought legal guidance from White House lawyers about whether the president has the authority to eliminate certain taxes, including income and business taxes, without the approval of Congress.
The discussions about how much power the president can wield over tax policy come as Mr. Trump prepares to delay payroll taxes for some workers until the end of the year. But unlike that move, which simply defers what workers owe until some point in the future, the White House is discussing whether the president can actually eliminate taxes owed by businesses, workers and investors.
The legality of such a move is dubious, but Mr. Trump has not been shy about pushing the boundaries of his authority. The Constitution gives Congress the power to set tax policy and lawmakers would most likely object to any attempt to bypass their authority. The executive branch does have wide latitude, however, to enact regulations regarding tax collection and it can defer taxes, as it did with the payroll tax and with the three-month delay of the traditional April 15 tax filing deadline.
“They clearly can delay pretty much anything for a year,” said Daniel Hemel, a tax law professor at the University of Chicago.
But Mr. Trump, who faces a tough re-election campaign amid a sputtering economy, has made clear that he wants to do much more than just delay taxes — and that another big tax cut will be a central part of his pitch for a second term. Getting such a tax cut through Congress would be tough, particularly if Democrats retain control of the House.
“We’re looking very seriously at a capital-gains tax cut and also at an income-tax cut for middle-income families,” Mr. Trump said at the White House on Monday evening. “We’re looking at expanding the tax cuts that we’ve already done, but specifically for middle-income families, and you’ll be hearing about that in the upcoming few weeks.”
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Mr. Trump and his advisers have regularly considered unorthodox tax maneuvers that they believe would spur economic growth, including reducing the taxes that investors pay on profits earned from selling assets like stocks or bonds. Mr. Trump has long said he has the authority to reduce so-called capital gains taxes by indexing those profits to inflation, which would essentially reduce both the gains and the tax owed on the sale of assets.
That position has been championed by Pat Cipollone, the White House chief legal counsel, who has presented an expansive view of the Treasury Department’s power to dictate tax policy through regulation. But Treasury Secretary Steven Mnuchin, who oversees the Internal Revenue Service, has adopted a more conservative approach as to how much can be done without congressional approval. The White House and Treasury Department ultimately determined last year that indexing capital gains to inflation would have affected a wide range of assets, creating unhelpful complications and costs.
Mr. Mnuchin said Wednesday that he believed reducing capital gains taxes would benefit the economy, but that it must be done through legislation.
“The president would like to do capital gains tax cuts,” Mr. Mnuchin said on the Fox Business Network. “We do need legislation to do what we need on that front.”
Mr. Mnuchin added that he believed congressional action would also be needed in order to waive the deferred payroll taxes, as Mr. Trump has suggested he would like to see happen.
A Treasury spokeswoman declined to comment on internal discussions about additional tax cuts. A White House spokesman did not respond to a request for comment.
As the 2020 election nears and Congress remains gridlocked over providing more economic relief, the idea of embracing executive authority to jump-start the economy has gained more traction inside the White House. Mr. Trump’s advisers believe that at the very least he is demonstrating to voters that he is taking action and that he intends to cut taxes.
One issue being debated within the White House is whether anyone would have legal standing to sue if the president did use executive action to halt tax collection on a more permanent basis. Tax scholars and some of Mr. Trump’s advisers have said that it would be difficult for a party to claim that they were harmed by a move that saves them money, even if it costs the federal government revenue.
Mr. Hemel said that if Mr. Trump wanted to push the bounds of his power to slow tax collection, he could in theory also direct I.R.S. staff not to come to work or reassign auditors to other tasks. More realistically, he said, Mr. Trump could temporarily have the Treasury Department adjust the amount of income tax that is withheld from workers’ paychecks to give them more take-home pay.
“This gets into a deep question of where executive power comes from and what its limits are,” he said.
White House officials are aware that stretching the boundaries of tax policy would bring backlash from Democrats and Republicans, along with possible legal challenges. Republicans were already cool to the idea of a payroll tax cut and, after years of criticizing President Barack Obama for his use of executive actions, some are growing tired of Mr. Trump circumventing Congress. The president’s decision to defer payroll taxes prompted a swift rebuke from Senator Ben Sasse, Republican of Nebraska, who scolded the president on Twitter for trying to circumvent congressional authority.
“No president — whether named Obama or Trump or Biden or AOC — has unilateral power to rewrite immigration law or to cut taxes or to raise taxes,” Mr. Sasse said on Monday. “This is because America doesn’t have kings.”
But Mr. Trump, who had planned to campaign on a record economic expansion before the coronavirus pandemic struck, has made little headway in developing new economic policies that could help the U.S. climb out of what is expected to be a long, slow and painful recovery. Tens of millions of Americans remain out of work and job growth is showing signs of slowing.
The White House and Congress have failed to reach an agreement on another economic relief package. Negotiations between Republican and Democratic lawmakers are at a stalemate and no formal talks have been scheduled this week, making it increasingly unlikely that legislation will pass this month.
While he searches for an economic strategy, Mr. Trump has seen his advantage on the issue start to slide. After three years of growth, pandemic plunged the nation into recession early this year. What was an initial rebound that began in April has faltered amid a resurgence of the virus in July.
Several national polls released last month showed a sharp reversal in fortune for the president, who led his presumptive Democratic opponent, former Vice President Joseph R. Biden Jr., on economic issues in polling as recently as last month. A Quinnipiac University poll of registered voters nationwide found Mr. Biden leading Mr. Trump on the question of who would do a better job handling the economy, 50 percent to 45 percent. Mr. Trump had enjoyed a similar-size lead in June.
The poll and two others released on the same day also showed Mr. Trump underwater on economic issues. It found 53 percent of Americans disapproved of his handling economic issues, as did a new poll from the Democratic polling firm Navigator Research. A CNBC/Change Research poll found 54 percent of Americans disapproved of Mr. Trump’s handling of the economy.
White House officials believe that temporarily delaying taxes is a powerful political tool for the president. It allows him to draw a contrast Mr. Biden, who would raise some taxes if elected. And they believe that it will put Democrats in what will be the uncomfortable position of allowing those taxes to be reinstated when the deferment expires.
Stephen Moore, an outside economic adviser to the president, said that the president should consider delaying other kinds of levies, such as the gas tax, noting that it would be difficult administratively to determine how to later recoup that money. Mr. Moore, however, said that an attempt to nullify certain taxes entirely would be going too far.
“The president doesn’t have the authority to repeal a congressionally authorized tax,” Mr. Moore said.
Jim Tankersley contributed reporting.
Source: Elections - nytimes.com