GOP senators press Treasury to approve $200 billion capital gains tax break bypassing Congress
Two leading Republican senators are urging the U.S. Department of the Treasury to approve a $200 billion tax cut without congressional authorization, arguing the move could boost economic growth and ease housing market pressures ahead of the 2026 midterm elections.
Sens. Ted Cruz (R-Texas) and Tim Scott (R-S.C.) are set to send a letter to Treasury Secretary Scott Bessent asking him to use executive authority to index capital gains taxes for inflation; a step that would significantly reduce tax bills for many investors.
The push to bypass Congress
Cruz and Scott argue the administration does not need congressional approval to make the change, even though some conservative legal experts and Treasury officials have previously disagreed with that interpretation.
GOP Sens. Ted Cruz (Texas) and Tim Scott (S.C.) are asking the Treasury Department to approve a $200 billion tax cut without prior authorization from Congress.
The effort reflects a broader Republican strategy to improve the party’s economic approval ratings with voters as the midterm campaign cycle begins to take shape.
Cruz’s persistent efforts in Congress over several years
Before calling for executive intervention, Senator Cruz repeatedly introduced the Capital Gains Inflation Relief Act to codify these changes into federal law. His legislative push began in earnest in 2018 (S. 2688), during the first Trump administration, where he argued that taxing inflationary gains was a “pro-growth” barrier that needed to be dismantled. He reintroduced the measure in 2021 and again in 2025, often partnering with colleagues.
Most recently, in February 2025, Cruz introduced S. 798, an updated version of the bill that expanded the definition of “indexed assets” to include modern investments such as digital assets and NFTs.
Sen. Tillis who cosponsored the 2025 legislation said, “This commonsense legislation updates our tax code to ensure that hardworking Americans are not unfairly penalized for inflation. This bill brings much-needed fairness to the tax system and helps families keep more of what they earn.”
Despite gaining significant support from conservative advocacy groups like Americans for Tax Reform, these bills consistently stalled in the Senate Finance Committee, never receiving a full floor vote due to a lack of the 60-vote threshold required to overcome a filibuster.
What indexing capital gains for inflation means
Under current law, investors pay capital gains taxes on the full nominal profit from the sale of assets such as stocks, businesses or homes; even when part of that gain reflects inflation.
For example, an investor who bought $100 worth of stock in 1990 and sold it today for $300 would owe taxes on the full $200 profit. Adjusted for inflation, however, that original $100 investment would be worth roughly $230 in today’s dollars. Under the Cruz-Scott proposal, taxes would apply only to the $70 in real gains.
That is why the proposal is known as indexing capital gains for inflation.
Senators frame proposal as pro-growth
In their letter to Bessent, Cruz and Scott describe the move as a powerful economic lever the administration can pull on its own.
“Using your executive authority to … eliminate an unfair inflation tax on everyday Americans is the single most pro-growth economic action the administration can take unilaterally, and it would boost savings, spur investment, and create jobs nationwide,” the senators write.
They also argue, “This inflation tax unfairly penalizes savers and locks up capital that would otherwise flow back into the economy through new investment and higher wages, which slows economic growth.”
Housing market at the center of the argument
The senators contend the change could help address strains in the U.S. housing market, where limited supply has driven up prices.
“Many Americans are choosing not to sell their homes to avoid substantial capital gains taxes, creating a lock- in effect that discourages downsizing even when their homes no longer meet their current needs,” the two lawmakers wrote.
“Adjusting the capital gains cost basis for inflation incentivizes those who have held property for decades to downsize and list their single-family homes for sale—increasing the supply of family housing,” they added.
Last week, mortgage rates fell below 6 percent for the first time in more than three years. The 10-year Treasury yield also reached its lowest closing level since November, providing some relief for prospective buyers.
A $200 billion price tag
Cruz’s office estimates the change would cost roughly $200 billion in lost federal revenue. A 2018 analysis by the Penn Wharton Budget Model projected that indexing capital gains to inflation would reduce government revenues by $102 billion over a decade.
That same forecast found that 86 percent of the benefits would go to the top 1 percent of income earners, while the bottom 80 percent would receive just 1 percent.
Critics say benefits skew to the wealthy
Opponents argue the policy would overwhelmingly favor affluent households with large investment portfolios and high-value real estate holdings.
During President Donald Trump’s first term, the Penn Wharton Budget Model similarly found that the top 1 percent would receive roughly 86 percent of the benefits from indexing capital gains to inflation.
Those findings have fueled Democratic criticism and skepticism from some tax analysts who warn the change could exacerbate income inequality.
Legal obstacles loom large
The proposal faces significant legal uncertainty. A 1992 opinion by the Justice Department’s Office of Legal Counsel concluded that Treasury does not have the authority to unilaterally index capital gains and that such a move would require an act of Congress.
Harvard professor Jason Furman argued that for the proposal to work properly, broader inflation adjustments would be necessary.
“Not good tax policy if you don’t adjust other parts of the system for inflation, most importantly reducing people’s interest deduction to only real interest–no longer allowing deductions for the inflation component of interest,” he wrote in a post on X.
Any executive action would likely face immediate legal challenges.
Trump’s prior stance and conservative lobbying
During Trump’s first term, then-Treasury Secretary Steven Mnuchin weighed the option but ultimately concluded Congress should act instead.
Conservative advocates have lobbied the administration to adopt the measure.
The push comes after Trump worked with congressional Republicans to pass the “One Big Beautiful Bill,” a sweeping tax package that made permanent many of the 2017 tax cuts and was estimated to cost more than $3 trillion.
Unclear path forward for Treasury
It remains unclear whether Bessent is inclined to pursue the change. Supporters believe he may be more receptive than his predecessors, particularly as the administration looks to reinforce its economic agenda.
Cruz and Scott signaled their readiness to assist.
“We stand ready to support you in providing relief to everyday Americans who are still reeling from President Joe Biden’s historic inflation crisis,” they write.
Whether the Treasury Department moves forward; and whether courts would ultimately allow it; could determine if this long-sought conservative tax goal becomes reality without a vote in Congress.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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