Republican Senators Ted Cruz (Texas) and Tim Scott (South Carolina) are asking the Treasury Department to approve a $200 billion tax cut without prior authorization from Congress.
Two senators are asking the Trump administration to cut investors’ capital gains taxes by adjusting the basis for inflation, arguing it would increase savings, spur investment and create jobs across the country.
“This inflation tax unfairly punishes savers and locks in capital that would otherwise flow back into the economy through new investment and higher wages, slowing economic growth,” Cruz and Scott wrote in a letter to Treasury Secretary Scott Bessant.
The Washington Post first reported the development, which comes after tax breaks were solidified in last year’s spending bill.
Republicans have previously supported plans to index capital gains despite concerns that the effort would disproportionately benefit the wealthy.
A 2018 budget modeling forecast from the University of Pennsylvania’s Wharton School found that tying capital gains to inflation would reduce government revenue by $102 billion over a decade, with 86% of the gains going to the top 1%.
Harvard professor Jason Furman said Cruz and Scott’s tax cut proposals would need to trigger other adjustments based on inflation.
He responded to American Enterprise Institute senior fellow Kyle Pomerleau in a post on social platform
Pomerleau’s assessment follows a 1992 opinion from the Justice Department’s Office of Legal Counsel that said such tax policy changes would require congressional approval.
While the program may face tough legal challenges, Cruz and Scott, chairman of the Senate Banking, Housing and Urban Affairs Committee, said the tax breaks would address some of the instability in the housing market.
“Many Americans choose not to sell their homes to avoid hefty capital gains taxes, creating a lock-in effect that discourages downsizing even if their homes no longer meet current needs,” the two lawmakers wrote.
They added: “Adjusting the capital gains cost basis for inflation increases the supply of family housing by incentivizing those who have held onto their properties for decades to downsize and list their single-family homes for sale.”
Last week, mortgage rates fell below 6% for the first time in more than three years, opening new doors for homebuyers. The 10-year Treasury yield also hit its lowest closing level since November, leading to further easing in mortgage rates.
While it’s unclear how Bessant will respond to Cruz and Scott’s proposal, it could be seen as a nod to President Trump’s economic agenda, as Trump said last month he would be “particularly focused” on the housing market.
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