Trump Eyes Capital Gains Tax Cuts Ahead Of Midterms

White House Weighs Capital Gains Relief Before November Vote

President Donald Trump (@realDonaldTrump) is considering a package of capital gains tax cuts ahead of the November midterm elections, according to Bloomberg. The proposals are part of a broader push by Republicans to sharpen their economic message with voters as the party faces a challenging political environment.

Central to the discussions is the idea of indexing capital gains to inflation. Indexing capital gains reduces taxes by adjusting them for inflation. In practice, this means investors would only be taxed on real gains rather than nominal ones. Prior administrations, including Trump during his first term, have looked at indexing capital gains to inflation unilaterally without Congress, but legal experts say that would likely face court challenges.

Former National Economic Council Director Larry Kudlow, a close Trump ally, confirmed the conversations are live. Kudlow said he had recently spoken with Trump about indexing capital gains and also suggested exemptions for sales of homes worth $2 million or less from capital gains taxes, adding that "the boss is very interested" in those ideas. "I spoke to him, he liked the idea of the indexing, he liked the idea of a bigger exemption," Kudlow said.

Home Sales and Fiscal Concerns

On the housing side, Kudlow floated a larger exemption for home sales, potentially excluding homes worth $2 million or less from capital gains taxes. The current exemption stands at $500,000 for married couples filing jointly. Raising the exemption for home sales has support on both sides of the aisle.

Current NEC Director Kevin Hassett signalled there is more to come. Hassett said Trump was looking for new ideas to boost his party with voters. "He wants to hit people with the things that are promises that we're going to do if the Republicans have power in the future," Hassett said.

The proposals do carry fiscal risks. Estimates have found that inflation indexing capital gains could reduce revenue by $170 to $950 billion through 2035, depending on if it is applied retroactively. The prospect of more tax cuts has elicited a mixed reaction from lawmakers, especially amid a steadily growing fiscal deficit. The Congressional Budget Office said the fiscal deficit is estimated at $1.8 trillion in the first 10 months of 2026.

Politically, the proposals are not without risk either. The benefits of the capital gains proposal or exempting home sales from levies would be heavily tilted toward the wealthy, opening up Republicans to potential political attacks. Most tax changes require congressional legislation, making it unlikely any of Trump's ideas could become law before the November midterms.

Sources:
Trump Weighs Call for Capital Gains Tax Cuts as Midterm Boost (AdvisorHub / Bloomberg)
Unilateral Executive Tax Cuts Could Add Hundreds of Billions to Debt (Committee for a Responsible Federal Budget)
Trump Considers Capital Gains Tax Cuts Ahead of Midterm Election (Investing.com)