Republican Sens. Ted Cruz and Tim Scott are reportedly sending a letter to Treasury Secretary Scott Bessent this week calling for a policy change that would deliver a roughly $200 billion tax cut to investors and homeowners, without the need for congressional approval.
The Washington Post’s Jeff Stein reports Tuesday that Cruz and Scott are urging Bessent to allow asset owners to adjust their gains for inflation, thereby reducing tax bills, especially for those who have held assets for many years.
Conservatives have been pushing for the change for years — “It is wrong to tax inflation,” anti-tax activist Grover Norquist wrote in 2019 — but it is not clear if the executive branch has the authority to index capital gains to inflation on its own.
Cruz’s office has reportedly estimated that the inflation index would cost about $200 billion in lost tax revenues and would boost the housing market by making it less costly for long-time homeowners to sell.
“Using your executive authority to ... eliminate an unfair inflation tax on everyday Americans is the single most pro-growth economic action the administration can take unilaterally, and it would boost savings, spur investment, and create jobs nationwide,” the letter to Bessent reportedly says.
Critics say the inflation adjustment would overwhelmingly benefit the wealthy. As Stein notes, the Penn Wharton Budget Model estimated that 86% of the benefits of indexing capital gains to inflation would flow to the top 1% of earners, while the bottom 80% would get just 1% of the benefit.
Kyle Pomerleau, a tax policy expert at the conservative American Enterprise Institute, said on social media that the proposed change would likely be illegal. In addition, Pomerleau dismissed the idea that it would have much of an effect on growth, saying it wouldn’t “have much of an impact on the economy one way or another.”