Known crypto critic America’s President, Donald Trump towards achieving his second term bid has proposed to cut capital gain tax.
President Trump said this while speaking to Fox business on Thursday. He said he would get his way around a six percent capital gains tax cut.
“I’m going to do a capital gains tax cut to 15 percent in the second term,” he said. “We’re going to get it down to 15 percent. It’s at 21percent. We’ll get that down to 15percent. I’ll get that done easily.”
As much as President Trump is confident of cutting capital tax gain, it might not be so easy. The president would need to get the approval of the Congress for such a cut.
However, pundits have said without the Congress approval, the president could achieve this tax cut. The president with an executive order could index capital gains to inflation putting the Congress aside.
The move would reduce the tax bill for investors as the original purchase price would be adjusted to meet current inflation. While differing from a formal capital gains tax cut, indexing would have much the same result.
How President Trump capital gains tax cut would benefit Bitcoin investors
Reportedly, if President Trump proposed capital gains tax cut comes to reality, the upshot on Bitcoin could be significant.
Roger Brown, head of tax & regulatory affairs at accounting firm Lukka, said that the tax cut would lead to a hike in crypto trading activities.
“Taxpayers with long term holding periods may seek to capture the reduction in capital gains by selling their crypto in the event the rate reduction is temporary.
This implies that taxable profit from investments like stock, real estate or cryptocurrency could enable crypto investors to capitalize in the short term. Brown warns, however, that it might put downward pressure on prices as investors try to sell off before the tax-cut window lapses.
Indexing capital gain, on the other hand, means a fairer rate of taxation according to Sean Ryan, co-founder of blockchain tax firm Node40. He explains that with it, investors would not pay tax on gains they don’t make. “This disproportionately benefits higher-income earners, but that’s who invests in cryptocurrency.
He also agrees with Brown’s theory that with the historical influence of capital gains cut on profit realization, certain crypto traders would eventually capitulate.