President Donald Trump is contemplating modifications to the capital gains tax, aiming to increase earnings for certain Americans and enhance his party’s position in the upcoming elections. Larry Kudlow, host of Fox Business and former National Economic Council (NEC) director, discussed these potential changes with Trump, noting that the president showed interest in two specific proposals.
Proposed Changes
Kudlow revealed that Trump expressed approval for indexing capital gains to inflation and suggested larger exemptions for home sales. According to White House Spokesman Kush Desai, Trump is continually seeking ways to ‘Make America Wealthy Again,’ although any policy announcements would come directly from the administration.
Details of the Considered Proposals
Kevin Hassett, current NEC director, emphasized that Trump and the Republican Party are looking forward rather than resting on past achievements. More policy proposals are anticipated before the midterms.
While specifics on taxes remain sparse, Kudlow’s suggestions involve significant changes. Indexing capital gains to inflation would adjust an asset’s original purchase price to reflect inflation before calculating the taxable gain. For example, if an investor gained $100,000 on an asset during a period of 10% inflation, they would be taxed on $90,000 instead of the full amount.
Supporters argue that current price increases largely account for declining purchasing power, often labeled as ‘phantom gains,’ rather than actual value increases. Furthermore, Kudlow proposed the possibility of increased exemptions on home sales, potentially affecting properties valued up to $2 million.
Who Stands to Gain?
Any substantive change would likely require new legislation. Yet, the proposals could substantially benefit Americans with substantial stock holdings or other taxable assets, and those selling higher-value homes. Conversely, younger individuals without assets, renters, and homeowners already covered by existing exemption levels may not experience benefits.
According to Len Burman, co-founder of the Tax Policy Center, the benefits would mainly favor the wealthiest households given how assets are distributed in the U.S. Currently, over 60% of Americans own stocks, yet 93% of stock market wealth is held by the top 10% of wealthiest households, as Federal Reserve data shows.
Burman added that the current capital gains tax exemption for primary residence sales—$250,000 for singles and $500,000 for married couples—covers most homes. Realtor.com notes homes must exceed $1.25 million to face capital gains tax, a threshold affecting only 10% of properties.
Burman warns that voters already grappling with high housing costs would oppose policies potentially increasing demand for luxury homes and further elevating land prices. Such proposals may also seem politically insensitive, considering many households’ affordability issues and segments of Trump’s support base.
Contact for this story: Ben Kelly and James Debens, Newsweek editors.