It’s time to cut the capital gains tax. Right now. If there’s a 3.0 reconciliation budget bill that requires only 50 Republican votes plus Veep Vance for 51, the GOP can do it. Put a capital gains tax cut in that 3.0. It’ll add growth to the GOP message. Polls show that in addition to the voter ID bill, voters want government fraud to be cleaned up, and they’d like middle class tax cuts for growth.
Yet we need some leadership from the Senate majority leader, John Thune, and we also have to convince President Trump. He does want a reconciliation 3.0 bill for the SAVE America voter ID citizenship bill and for military spending replenishment, both of which are fine by me — but we need a cap gains tax cut that will benefit average middle class working folks.
Right now empty nesters don’t need their multi-bedroom homes, but they really can’t afford to pay a $500,000 capital gains tax which comes mainly from President Biden’s 21 percent inflation during his four years in the White House.
Last night I talked to Newt Gingrich about this issue and here’s what the former House Speaker said: “There are millions of Americans whose children have grown up their houses too big. They’d like to sell it. But the current tax consequence is so great they won’t sell it.” Indexing capital gains, he added, “it’s very simple. Should you have to pay tax on inflation? Now, if you don’t pay tax on inflation, suddenly you have a much bigger interest in investing.” Mr. Gingrich concluded that “when we cut the capital gains tax, when I was speaker, revenue was at $60 billion from capital gains. After we cut it, it jumped to $200 billion”
Sure enough, absolutely. Actually, no one should have to pay a tax on inflation. So if we index the capital gains tax for inflation, people would just pay tax on the real appreciation of their home or other assets, and that is much fairer.
We’re not just talking about the rich by the way, but really middle-class homeowners who might have bought their house maybe 30 or 40 years ago, and the inflation mounts up. Why should they be soaked just because the Federal Reserve printed too much money, or the federal government spent too much money? The answer is that they shouldn’t.
Many of us have been fighting this battle for decades. Yet now if we want to end the housing recession, indexing capital gains would unlock probably a million homes for sale on the market that would be available at a decent price for Gen Z and millennial affordability.
Here’s another key point. The capital gains tax exemption for the sale of a home should be doubled. Right now it’s at $250,000 for a single person, and $500,000 for married filing jointly couples.
These levels have not been changed since 1997, nearly 30 years ago. There’s been a lot of inflation since then. So why not raise the capital gains tax exemption to $500,000 for singles and $1 million for married couples filing jointly? It’s guaranteed that the unlocking effect because of lowering capital gains taxes will produce a flood of revenues for the federal fisc, and will greatly loosen up the frozen housing market.
The trend for existing home sales is about 5 million a year over time. But in recent years, it slumped to 4 million a year. A drop of one million a year. Cutting the capital gains tax will boost these sales and probably new housing starts as well.
It would be great to get lower mortgage rates and easier regulations at the local level. Closing the border by Mr. Trump will stop all of the illegal migrants who bid up rental homes and home ownership prices. And according to a paper published by the Federal Reserve Bank of Dallas, this wave of migration accounted for roughly 30 percent of home-price growth. Cutting the capital gains tax would be huge. Let’s get going on it.
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