President Trump floats cutting capital gains tax

Yahoo Finance’s Brian Sozzi, Alexis Christoforous, and Rick Newman discuss the new round of stimulus, and a potential capital gains tax cut.

Video Transcript

ALEXIS CHRISTOFOROUS: And we have our senior columnist Rick Newman joining us now to break down what's happening in the White House. Good morning, Rick. Just first off, this capital gains-- the idea of a cut in the capital gains tax, is this something that Trump can do alone without the backing of Congress?

RICK NEWMAN: Almost certainly not. He may come up with some sort of executive action, as he has done with other things, that could make an effort to do something. There's this talk about indexing the asset to inflation, which would in effect reduce the capital gains you would owe if you sold the asset.

This is-- I mean, let's just remind everybody. Congress has to pass laws that change-- that impose or raise or lower taxes. The president cannot do this unilaterally. Trump keeps trying to. There's no chance Congress is going to pass anything like this this year.

And if you think about it, lowering the capital gains tax does not help people who are struggling the most from the recession we're in right now. It helps wealthy people who have capital gains. I mean, most people don't have capital gains. And that's not the thing that's going to really help anybody here. So Trump has been talking about this for a long time even before the coronavirus pandemic. It's something he would like to do. But I just don't see how he's going to be able to do it.

ALEXIS CHRISTOFOROUS: Now he's saying that if he were to cut the capital gains tax, it would create jobs. Can you connect the dots on that one for us?

RICK NEWMAN: No. I can't. I mean-- I mean, this is basically supply side, trickle down economics. The idea, I guess, is that if you give wealthy people more money to spend, they will spend it on things that will help, you know, add jobs or keep people employed. I mean, if you think about all the steps we have to go through to get to that point, I mean-- you know, right now, wealthy people probably don't need a fifth or a sixth car or a new boat. And I don't think there's much evidence that this actually works anyway.

I mean, the kind of stimulus you need in a grueling recession like this is you need to put money into the pockets of people who are unemployed-- I mean, that's who we should be thinking about right now-- or people who are furloughed or people who are working part time because they can't work full time even though they would want to. So the idea that if you just give the wealthy more money to spend and it trickles down eventually to the people who need it I just don't think is going anywhere.

ALEXIS CHRISTOFOROUS: So, of course, what people do need right now, the majority of people, are for those unemploy-- those weekly unemployment benefits to be reinstated. We know that, in his executive action, Trump is saying that states would have to chip in on that. Governor Cuomo in New York is already saying he doesn't see how that's possible. Do you think that this is going to be enacted?

RICK NEWMAN: Well, it-- I think it could be enacted. I mean, so Trump did sign this executive action last Friday on this. So I think it can be enacted. But just saying that states have to come up with money they don't have because the president told them to doesn't mean the states are going to come up with the money. And there's another problem with the order that President Trump signed, which is just complex.

And you know, this all has to run through state unemployment offices, which are honestly just not equipped to impose this formula that Trump has laid out, which is 75% federal aid coming from some other pot of money, some emergency funding money that's out there, and 25% coming from the states. I mean, it just seems like something that is going to be very hard to implement.

I think Trump-- what Trump's doing here is he wants to be able to say, look, Congress isn't getting anything done, so I'm doing the-- at least I'm doing something. I don't have all the power I would like to have here, but at least I'm doing something. So I think it's really an election ploy more than something that's going to put money in people's pockets.

But if Congress ends up not doing anything, we'll find out if these-- if the way Trump is trying to do this-- this actually works. I think the better hope here is that Congress actually does pass its own extension of those federal unemployment benefits, and it could be retroactive, by the way. So people who are not getting the extra aid right now, they could get it retroactively.

ALEXIS CHRISTOFOROUS: Yeah, well, that would certainly be good news. All right, Rick Newman, thank you.