Ted Cruz and his colleagues are at it again. This time, they're not even waiting for a vote in Congress. A group of Republican senators, led by Cruz and Tim Scott, recently sent a letter to Treasury Secretary Scott Bessent with a very specific, very expensive request. They want the Treasury to bypass the legislative process entirely and use executive authority to "index" capital gains for inflation.
If that sounds like dry, technical jargon, don't let the language fool you. It's essentially a $200 billion handout disguised as a clerical adjustment. The goal is simple: change how the IRS calculates profits from the sale of assets like stocks and real estate so that the wealthy pay significantly less in taxes. It’s a move that has been on the conservative wish list for decades, and they’re finally making a hard play for it.
The Inflation Defense and Who Actually Profits
The argument from the Cruz camp is that taxing the portion of a gain that comes from inflation is "unfair." They call it an "inflation tax" on everyday Americans. To understand how this works, look at a basic example. Suppose you bought $100 worth of stock in 1990 and sold it today for $300. Under current law, you owe capital gains taxes on the $200 profit.
However, because of inflation, $100 in 1990 is worth about $230 today. Cruz argues you should only be taxed on the $70 "real" profit. While that sounds logical on the surface, the reality of who owns these assets tells a different story. According to 2025 Federal Reserve data, the richest 1% of Americans own about half of all stocks. The bottom 50%? They own just 1%.
When you look at the math, the "everyday Americans" Cruz mentions aren't the ones benefiting. Penn Wharton Budget Model projections show that a staggering 86% of the benefits from this specific policy would go to the top 1%. Even more concentrated: 63% would flow to the top 0.1%—people making tens of millions of dollars a year. It’s not a middle-class relief plan; it’s a boost for the highest earners in the country.
Bypassing Congress and the Legal Hurdle
What’s most aggressive about this current push is the attempt to sidestep the democratic process. Cruz and Scott aren't asking for a new bill to be debated on the Senate floor. They're asking the Treasury Department to "redefine" the word "cost" in the tax code through administrative action.
This isn't a new idea. The George H.W. Bush administration looked at this in 1992, and the Trump administration toyed with it in 2018. Both times, the Department of Justice and legal experts concluded that the Treasury lacks the authority to do this without a green light from Congress. By pushing for it now, the GOP is essentially asking the executive branch to rewrite tax law on its own.
The One Big Beautiful Bill Backstory
This push comes on the heels of the "One Big Beautiful Bill Act" (OBBBA) passed in July 2025. That legislation already made massive changes to the tax code, largely by making the 2017 tax cuts permanent. It funneled over $1 trillion to the top 1% over the next decade while cutting social programs like Medicaid and SNAP.
Despite those wins for the donor class, the appetite for more hasn't faded. The timing of this new capital gains request isn't accidental either. With the 2026 midterms approaching, the GOP is struggling with economic approval ratings. They’re framing this as a "pro-growth" move to boost the housing market and incentivize investment.
But history isn't on their side. Decades of data on "trickle-down" policies show that these types of tax breaks rarely result in broad economic gains. Instead, the wealthy tend to pocket the savings. If you're a school teacher or a retail worker, your income is taxed at standard rates every paycheck. If you're a billionaire living off stock sales, this proposal ensures you stay in a much lower tax bracket than the people actually working for a living.
What This Means for Your Wallet
If you aren't sitting on a massive portfolio of decades-old stocks, this policy change won't do much for you. It might even hurt. Slashing $200 billion from federal revenue has to be accounted for somewhere, usually through further cuts to public services or by shifting the tax burden onto labor rather than capital.
The move would also create a massive new loophole for "tax loss harvesting." Savvy investors could use inflation-adjusted losses to wipe out other taxable income, effectively opting out of the tax system entirely. It’s a complex strategy that requires high-priced accountants—something "everyday Americans" don't exactly have on speed dial.
Keep an eye on the Treasury’s response in the coming months. If Bessent decides to play ball, expect immediate legal challenges and a massive political firestorm. You should review your own capital gains exposure, but don't hold your breath for a windfall unless you're already in that top 1% bracket. The best move is to stay informed on how these "technical adjustments" actually impact the national deficit and your local services.
