Trump’s team doesn’t want to change the treatment of investment income as part of a broad, carefully thought out reform plan, however. It’s “studying” whether to tweak the treatment of capital gains without any concern for how it might affect other parts of the tax code. “On a scale of 1 to 10 where 10 is a great idea and 1 is an awful idea, it’s 2 or 3,” Shuldiner told me. Aside from handing a giant, unearned tax break to investors who bought stocks years ago, the move could create opportunities for new or more profitable tax shelters. “Indexing via executive action would be an invitation to arbitrage,” tax law professors Daniel Hemel of the University of Chicago and David Kamin of New York University wrote in a recent paper critiquing the administration’s idea. The move would be a giveaway not just to the wealthy investor class but also to their accountants.

In their paper, Hemel and Kamin argue persuasively that the Trump administration lacks the legal power to make this change by fiat. Tax lobbyists say Treasury has the authority because it’s supposedly ambiguous what Congress meant when it inserted the word cost into the tax code during the early 20th century. Very few others seem to think this is the case; the first Bush Justice Department concluded that “the legislative record evidences a clear congressional intent that ‘cost’ be given its common and ordinary meaning, that is, price paid in nominal dollars not adjusted for inflation.” The debate is even more absurd when you consider that Congress has changed the capital gains rate many times over the years, and none of its budget projections involved indexing the tax to inflation.

Read more at Slate