Taxing only the real gain: can a president do it alone?

President Trump is weighing a cut to capital gains taxes ahead of the midterm elections, Bloomberg reported on August 11. The discussions are said to include indexing, which subtracts inflation from a gain before the tax is calculated.

Nominal gain and real gain

Say you buy a stock for $100,000 and sell it five years later for $200,000. Today the tax lands on the whole gain. If prices rose 20 percent over those five years, what you originally paid is worth $120,000 in today's money. Indexing treats that $120,000 as the purchase price, so the taxable gain becomes $80,000. Put simply, the part of the gain that inflation created would no longer count as a gain.

The last big cut to US capital gains rates was in 2003, when the top rate went from 20 percent to 15 percent. A separate 3.8 percent net investment income tax now sits on top of that.

Can Treasury do this by regulation alone

What is at stake here is authority, not the rate. Section 1012 of the federal tax code describes the purchase price of an asset only as its "cost." The fight is over whether that word can be read as a number adjusted for inflation. On September 1, 1992, Assistant Attorney General Timothy Flanigan of the Justice Department's Office of Legal Counsel issued an opinion. It concluded that Treasury has no legal authority to index capital gains for inflation by regulation. The reasoning was that "cost," in statutory language running back to 1918, means the price actually paid, and that Congress had chosen to handle inflation through preferential rates rather than through the purchase price. The same idea came up during Trump's first term in 2019. Treasury Secretary Steven Mnuchin said legislation should come first, and the idea quietly disappeared.

Conservatives eye Treasury action to index capital gains for inflation (Washington Examiner, 2026-07-17)

출처: washingtonexaminer.com

That piece walks through this year's revived push and adds one thing: after the 2024 Loper Bright ruling, courts no longer automatically defer to an agency's reading of a statute. The same regulation would therefore be harder to defend in court than it would have been in 1992. On March 6 this year, Representative Mark Alford and others wrote to Treasury Secretary Scott Bessent urging him to use existing executive authority. How Treasury answered is not on the record.

The scope decides the number

In the same work, households in the top 0.1 percent save roughly $350,000 on average, while the bottom 40 percent of earners get essentially nothing. The break only appears when a long-held asset is sold. Housing sits slightly apart. Trump is also said to have floated exempting sales of homes worth $2 million or less. The current exclusion on gains from a primary home is $250,000 for a single filer and $500,000 for a couple, set in 1997 and never indexed since. That exclusion is the example the indexing camp reaches for most often.

Before the November midterms, statute or regulation

If it arrives as a bill, the question is a vote count in Congress. If it arrives as a Treasury regulation, it meets the 1992 opinion and Loper Bright from the day it takes effect. So the life expectancy of this tax cut is set by its form rather than its rate. As a regulation, even one in force leaves after-tax returns impossible to pencil in until the litigation ends; as legislation, passage itself is the answer. Which of the two shows up is the thing to watch before November.