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By Hugh Cameron
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President Donald Trump is reportedly considering implementing changes to capital gains tax in an effort to boost certain Americans’ earnings and his party’s prospects in this year’s elections.
Speaking on Tuesday with Kevin Hassett, director of the National Economic Council (NEC), Fox Business host Larry Kudlow said he had recently talked about potential changes to the tax framework with Trump, who had tacitly endorsed two proposals.
Kudlow, who served as NEC director during the president’s first term, said Trump "liked the idea" of indexing capital gains to inflation, as well as the possibility of larger exemptions for home sales.
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White House Spokesman Kush Desai told Newsweek that Trump was "always exploring new ideas to Make America Wealthy Again," but said that any policy announcements would be made by the administration directly.
What Is Trump Considering?
Hassett told Fox Business that Trump and the Republican Party were committed to not running "in the rearview mirror" and simply championing past accomplishments, and that voters should instead expect "a lot more policy [proposals] between now and the midterms."
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While he did not comment on taxes specifically, the proposals raised by Kudlow would mark a major change to the existing federal capital gains tax framework, which was left largely unaltered by Trump’s signature tax bill, or One Big Beautiful Bill Act.
The first—indexing capital gains to inflation—would mean adjusting the original purchase price of an asset to account for economywide price increases before calculating the taxable gain. In the case of an investor who had made a $100,000 gain on an asset over a period during which inflation was 10 percent, the individual would only be taxed on $90,000 of that rather than the full amount, as is the case under the current system.
Supporters of the proposal have long argued that, currently, much of an asset's price increase simply reflects declining purchasing power—or "phantom gains"—rather than any actual increase in value.
Kudlow said President Donald Trump also liked the idea of a "bigger" exemption on home sales—having earlier said this could involve exemptions on properties worth up to $2 million.
Who Would Benefit From the Changes?
While implementing the changes would likely require new legislation being passed in Congress, the president can propose and lobby for the changes which could significantly benefit the country’s asset-holding class.
Gains would be focused on Americans with significant stock holdings or other taxable assets, as well as homeowners selling higher-value properties. By contrast, younger Americans without assets, alongside renters and homeowners whose properties already fall under the existing exemption-levels, would not benefit from the outlined changes.
"These are both terrible policy and politics," said Len Burman, co-founder of the nonpartisan, D.C.-based Tax Policy Center and a professor at Syracuse University.
Burman told Newsweek that the benefits of both would "disproportionately accrue to the wealthiest households," given the existing distribution of assets in the U.S.
Gallup polling finds that over 60 percent of Americans currently own stocks, but 93 percent of U.S. households’ stock market wealth is currently held by the wealthiest 10 percent according to Federal Reserve data cited by Axios.
Meanwhile, Burman says that the current exemption—up to $250,000 for single filers and up to $500,000 for married couples filing jointly—for gains on the sale of a primary residence already covers "all but the most valuable homes from tax," and that "houses would have to sell for more than $1.25 million to have any exposure to capital gains tax."
This constitutes the "luxury threshold," according to Realtor.com, which finds that 90 percent of homes are valued below this level.
"Given that voters are burdened by high and rising housing costs, they’d be especially dismayed at the thought of a policy that would boost the demand for minimansions, and further push up land prices," Burman said, adding that the proposals also appeared "politically tone-deaf" given the affordability struggles facing many households and elements of Trump’s base in particular.
Contact Newsweek editors on this story: Ben Kelly and James Debens
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