Conservatives are asking Trump for another big tax cut

Fresh off passage of the “One Big Beautiful Bill,” several conservative organizations and Republican lawmakers are preparing to ask President Donald Trump for another major tax cut - this time, potentially without congressional approval.

Trump’s tax and immigration law is projected to add more than $4 trillion to the national debt over the next 10 years, broadly reducing tax rates while cutting spending on Medicaid and clean energy subsidies. The legislation is the culmination of years of advocacy on the right, making permanent many of the 2017 tax cuts Trump approved during his first term, and it represents one of the most expensive new laws in decades.

With that victory newly secured, conservative groups - including Americans for Tax Reform, led by anti-tax crusader Grover Norquist - are already asking the Trump administration to get behind another cut, which would drastically reduce what investors pay on their capital gains.

The plan rests on changing how the Treasury Department calculates those taxes.

Currently, an investor who bought stock for $1,000 in 1980 and sold it for $10,000 today would owe capital gains taxes on the increase in value of $9,000. But under the proposal pitched by Norquist and others, the calculation would start by adjusting up the value of the original purchase to account for inflation - which would reduce the amount of gain that’s taxable after selling the stock.

Although a 1992 Justice Department opinion found that such a change would require an act of Congress, Norquist and other conservatives want the Treasury Department to execute such a policy unilaterally if necessary, providing a major windfall for people selling stocks, art, businesses, homes and other assets.

One GOP senator, speaking on the condition of anonymity to describe private conversations, said he had spoken with Treasury Secretary Scott Bessent about reviving the idea. House Speaker Mike Johnson (R-Louisiana) has also been pitched on supporting such a plan in recent weeks, as advocates try to build congressional support, said two other people familiar with the matter, who also spoke on the condition of anonymity to discuss private deliberations.

The Trump administration weighed unilaterally implementing the change during the president’s first term but backed off after Steven Mnuchin, then treasury secretary, suggested Congress should lead on the matter. Conservative groups are also asking congressional Republicans to include the measure in a second tax legislative package, possibly later this year or next year. (Johnson has said the GOP plans to pass a second party-line legislative package in the fall and a third in the spring of next year.) But if that does not emerge, they are also optimistic that Bessent may prove more sympathetic than Mnuchin to their case for Trump to act by executive order.

In an interview, Norquist said he directly recommended to Trump in a recent phone call that he should implement the change by executive order after passage of the tax bill, reminding the president that he had explored this option during his first term. Norquist, who argues that the new policy will help open up the housing market, said he has also talked to Bessent about the proposal.

Spokespeople for the Treasury Department and White House declined to comment.

“I said something like, ‘Mr. President, after we do the bill, we will need more economic growth. The Big Beautiful Bill is very pro-growth, but with this, we can have even more growth,’” Norquist said. “The bureaucracy stopped him the first time, but they can’t this time.”

It is unclear if the administration is considering such a plan. The GOP tax measure was only signed into law on Friday, and Trump’s economic team will be busy both implementing the tax overhaul and negotiating numerous trade deals ahead of a new Aug. 1 deadline before tariffs take effect.

Nonpartisan economists are sharply critical of the proposed change to the tax code. During Trump’s first term, the Tax Policy Center and Penn Wharton Budget Model found that indexing capital gains to inflation would add roughly $100 billion to $200 billion to the federal deficit over 10 years.

The affluent would disproportionately benefit from the change, those nonpartisan estimates have found. The highest-earning 1 percent of Americans would receive 86 percent of the benefits from indexing capital gains to inflation, while the bottom 80 percent of income earners would get just 1 percent of the benefits, Penn Wharton projected in 2018.

Meanwhile, the tax law Trump signed last week delivers more than $1 trillion in benefits to the top 1 percent while steeply cutting Medicaid and food stamps, according to the Institute on Taxation and Economic Policy, a left-leaning think tank.

“They just got a massive tax bill that is overwhelmingly tilted for the wealthy, and to hide the ball, they’re trying to unilaterally deliver additional tax cuts for the wealthy,” said Elizabeth Pancotti, managing director of policy and advocacy at the Groundwork Collaborative, another left-leaning think tank. “Why don’t they think the wealthy got enough in the tax bill they just passed?”

The Center on Budget and Policy Priorities, also a left-leaning think tank, has warned that indexing capital gains to inflation without adjusting other parts of the tax code would open up new tax-avoidance strategies. And the American Enterprise Institute, a center-right think tank, has said that it is “unlikely that indexing capital gains for inflation would provide the economy a meaningful boost,” while stressing the complexity of implementing the proposal.

The proposal faces major legal obstacles, as well.

The Justice Department’s Office of Legal Counsel in 1992 concluded that the Treasury Department did not have the authority for the unilateral cut. The change, if implemented unilaterally, would almost certainly face an immediate court challenge.

But conservatives have said they are optimistic they can persuade Trump. They are pitching the shift as providing relief from the inflation that occurred during the Biden administration, which Trump has frequently railed against. Trump also said in 2019 that it would be “very easy to do” and that a majority of his White House economic advisers supported it.

Stephen Moore, who has served as an economic adviser to Trump, said the proposal should be characterized as providing benefits to seniors, since it would lower their taxes on sales of stocks and potentially homes, though the first $500,000 in capital gains from home sales are already protected from taxes.

“Indexing capital gains is a layup - it’s something that would be hard for Democrats to argue against. It would be a big win for seniors, and it would unlock a lot of capital,” said Moore, who is also senior economic adviser for the America First Policy Institute and chair of the Committee to Unleash Prosperity, two conservative groups. “This something we’re really pushing, and the White House has been interested.”

The Independent Women’s Voice, another conservative group, is expected to join the push. Heather R. Higgins, chair of the Independent Women’s Forum, said in a statement that “this is one of those good ideas that should be a no-brainer and nonpartisan. … Keeping these dollars matters to women, families, and small businesses.” Higgins added that the administration should make the change via executive order if passing legislation was not feasible. Americans for Tax Reform also pointed to IRS data showing 30 million returns had capital gains filings of some amount, and that 22 million of those were in households with $200,000 or less in gross income.

Some GOP lawmakers, including Sens. Thom Tillis (North Carolina) and Ted Cruz (Texas), have endorsed legislation to enact the change. House and Senate Democrats are expected to overwhelmingly oppose the measure.