The Trump Administration is considering a massive $100B capital gains tax break that could benefit American investors. Although still in the evaluation stage, this tax change is an important piece of news that could completely change the investment landscape.

Tax Change, Details as Reported

Secretary of the Treasury Steven Mnuchin revealed the plan when he was interviewed during a visit to Argentina this month. Secretary Mnuchin indicated that the Treasury could potentially sidestep Congress by changing the way that costs are calculated for capital gains.

Mnuchin is quoted as saying “If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that.” He continued in the interview to say that “We are studying that internally, and we are also studying the economic costs and the impact on growth.”

What this essentially means is that taxpayers would be allowed to change the value of their assets based on current inflation.

Benefits on Large Investments Would Be Significant

As it stands today, taxes on capital gains are calculated without consideration for changes in inflation. Even if an asset was purchased a quarter of a century ago, the taxes today would be calculated on the total monetary gain. If gains were calculated while taking inflation into account, some investors would save tens of thousands, or even millions depending on the value of the asset.

The smallest gains would obviously mean only mild differences in total tax paid, but high value holdings would benefit significantly.

Likely to Be a Contentious Issue Should the Administration Proceed

It’s not completely known whether the Treasury could make a change like this without interference from lawmakers. Even if the Treasury redefines how costs are calculated, there would likely be legal challenges. Dem. Senator Chuck Schumer told reporters this week that “Mr. Mnuchin thinks he can do it on his own, but everyone knows this must be done by legislation.”

In the early 90s, President Bush had his administration investigate a similar rule change, but it was abandoned when staff members determined that it would need approval from lawmakers.

The biggest benefactors of such a change would obviously be the wealthiest asset owners, but even the average investor could benefit in a meaningful way. Regardless of how this story evolves, investors should follow the developments and consider how this would benefit their own portfolios.