Trump Administration Weighs Capital Gains Inflation Indexing Proposal

If adopted, the policy would change how the federal government calculates taxable gains, reducing the portion of returns attributable to inflation rather than real asset appreciation.

President Donald Trump is considering a proposal to index capital gains taxes for inflation, according to reporting by the Washington Examiner published August 13, 2026. The proposal would adjust the cost basis of an asset upward to account for inflation before calculating taxable gains, meaning investors would owe taxes only on real returns rather than on gains produced by currency depreciation. The policy has been publicly advocated by economist and television host Larry Kudlow, who has supported capital gains indexing for several years.

Under current federal law, capital gains are calculated as the difference between the original purchase price of an asset and its sale price, with no adjustment for inflation over the holding period. The Internal Revenue Code governs this treatment, and any change would require either a legislative amendment through Congress or, in a more legally contested path, a Treasury Department regulatory reinterpretation of the word 'cost' in Section 1012 of the tax code. Legal scholars have debated for decades whether Treasury holds unilateral authority to make this change without an act of Congress.

The Trump administration passed the reconciliation legislation referred to publicly as the One Big Beautiful Bill in 2025, which included expanded bonus depreciation and other business investment incentives. Proponents of capital gains indexing, including the Washington Examiner editorial board, argue the measure would build on that framework by increasing incentives for long-term asset holding and investment. Critics from budget-focused organizations such as the Committee for a Responsible Federal Budget have previously argued that capital gains indexing would reduce federal revenue and disproportionately benefit higher-income taxpayers who hold larger investment portfolios, though no formal congressional budget score for the current proposal has been published as of August 13, 2026.

No formal legislative text has been introduced in the 119th Congress as of the date of this report, and no Treasury regulatory notice has been published in the Federal Register. The Joint Committee on Taxation would be the body responsible for producing an official revenue estimate if legislation is introduced. The White House Office of Management and Budget has not released a formal budget impact analysis. It is unknown whether the administration intends to pursue this change through executive action or through Congress. A Treasury Department rulemaking notice or a House Ways and Means Committee markup would be the first public records confirming either pathway.