Republican senators Ted Cruz (R-TX) and Tim Scott (R-SC) are reportedly advocating for a $200 billion tax cut that would not require congressional approval, as the GOP seeks to boost its economic standing ahead of the midterm elections.
The senators plan to send a letter to Treasury Secretary Scott Bessent, pushing for inflation indexation to reduce the capital gains tax burden on Americans selling assets such as stocks, businesses, and homes. Cruz and Scott argued that the move would encourage savings, stimulate investment, and create jobs across the country, The Washington Post reported on Tuesday.
The proposal is also being framed as a possible remedy for the country’s housing market challenges. The senators argued that indexing the capital gains for inflation would incentivize long-term homeowners to downsize and sell, increasing the supply of family homes and easing market constraints. The proposed change is estimated to cost around $200 billion, according to Cruz’s office
According to the senators, the administration has the authority to implement the change without congressional approval. However, a 1992 Justice Department Office of Legal Counsel opinion found that the Treasury cannot make such a change on its own without involving the congress. Any attempt to do so through executive action would likely trigger immediate legal challenges.
The Treasury Department did not immediately respond to Benzinga‘s request for comment.
Experts Push Back Against ‘Not Good’ Policy
Harvard professor Jason Furman stated that for Cruz and Scott’s proposal to work, the tax cut would need to trigger other adjustments based on inflation. Calling it a “not good” tax policy, he argued on X that interest deductions should apply only to real interest, and not the portion driven by inflation.
Furman’s post was a response to Kyle Pomerleau, a senior fellow at the American Enterprise Institute, who claimed the measure is “illegal.”
Meanwhile, a 2018 Penn Wharton Budget Model analysis also estimated that indexing capital gains to inflation would reduce federal revenue by $102 billion over ten years, with 86% of the benefits going to the top 1% of earners.
GOP Faces Voter Anger Over Cost-Of-Living
As the GOP braces for the midterm elections in November, it is facing displeasure from voters over affordability concerns.
A new Emerson College poll conducted before the State of the Union showed President Donald Trump‘s disapproval rating rose four points to 55%, the highest since he returned to office last January. The economy, including jobs, inflation, and taxes, was identified as the top issue facing the U.S., cited by 30.3% of respondents.
Meanwhile, the Trump administration also turned its attention to housing market woes. From an investor ban on single-family homes to a 50-year mortgage plan, the president has floated several proposals over the past months. Last week, mortgage rates dropped below 6% for the first time in over three years, offering some relief to homebuyers.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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