By Rebecca Ballhaus, Alex Leary and Andrew Restuccia 

WASHINGTON -- President Trump backed away from pursuing 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 just don't see any reason to," Mr. Trump told reporters on the South Lawn of the White House when asked if he was pursuing any tax cuts. "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 17:55 ET (21:55 GMT)

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