Here's a political and financial two-for-one: a proposed $200 billion tax cut that, its backers claim, doesn't need a single vote in Congress to become reality. That's the idea reportedly being pushed by Republican Senators Ted Cruz (R-TX) and Tim Scott (R-SC) as they look for ways to boost the GOP's economic message before the midterms.
The plan, according to a report, involves sending a letter to Treasury Secretary Scott Bessent. The ask? Use executive authority to adjust how capital gains taxes are calculated by indexing them for inflation. In simple terms, if you sell an asset like stocks, a business, or a home, you'd only pay taxes on the real gain above inflation, not the paper gain that just kept pace with rising prices. Cruz and Scott argue this would encourage people to save and invest more, which in turn would create jobs. They also frame it as a housing market fix, saying it would give long-time homeowners a tax incentive to finally downsize and sell, adding more family homes to a tight market.
The estimated price tag for this change is about $200 billion. The political magic trick, according to the senators, is that the administration could do this on its own. But here's the first big snag: a 1992 opinion from the Justice Department's Office of Legal Counsel concluded the Treasury does not have that power. Any attempt to bypass Congress would almost certainly land in court immediately. The Treasury Department hasn't commented on the idea.
Economists and Analysts Aren't Convinced
Beyond the legal questions, the policy itself is getting some side-eye from experts. Harvard professor Jason Furman called it a "not good" tax policy on social media. He argued that for such indexing to work properly, other parts of the tax code—like deductions for interest—would also need to be adjusted for inflation, which this proposal doesn't do.
Furman was responding to Kyle Pomerleau of the American Enterprise Institute, who flatly stated the measure is "illegal." Then there's the question of who benefits. A 2018 analysis from the Penn Wharton Budget Model estimated that indexing capital gains to inflation would reduce federal revenue by about $102 billion over a decade. More strikingly, it found that 86% of those tax savings would go to the top 1% of earners.
