JAMES CARTER: One Simple Fix To Tax Code Could Help Unleash New Era Of American Economic Dominance

Donald Trump’s renewed pledge to “Make America Great Again” requires nothing less than reigniting economic growth and prosperity. Wealth creation is essential. Yet as Congress prepares to extend and expand upon Trump’s landmark Tax Cuts and Jobs Act of 2017, he can take matters into his own hands by issuing an executive order to index capital gains for inflation.

Taxing inflationary “phantom” capital gains is an unfair and ill-advised policy that punishes risk and success.

Consider this: You invest $1,000, and after four years of Joe Biden in the White House, you sell that investment for $1,100. But since inflation raged during Biden’s tenure, the $1,100 you receive will be worth less in real terms than the $1,000 you invested. And yet, under current law, you will pay a tax on your $100 capital “gain.”

Talk about perverse!

“As has been well documented,” writes Alan Auerbach, University of California economist, “realized capital gains may be subject to tax rates that easily exceed 100% of real gains in the presence of inflation.”

But it’s the law. And not only would eliminating it be the fair thing to do for investors, it would ignite a surge of American prosperity.

Eight years ago, the late Treasury economist Gary Robbins estimated that indexing capital gains for inflation would, by 2025, create an additional 400,000 jobs, grow the U.S. capital stock by $1.1 trillion and boost GDP by roughly $500 billion. Because capital gains were never indexed, average household income today is $3,600 lower than it could have been otherwise.

However, it’s never too late to start doing the right thing.

Congress has repeatedly toyed with indexing capital gains. In fact, indexing capital gains used to be a bipartisan issue. In the early 1990s, congressional Democrats touted indexing as an effective way to boost economic growth and benefit workers.

“If we really want to increase growth,”