Larry Kudlow pushes Trump to end the Biden inflation tax

DIRECT ANSWER: Larry Kudlow and National Economic Council Director Kevin Hassett told Fox Business that President Trump is weighing proposals to end the so-called Biden inflation tax by indexing capital gains to inflation and expanding capital gains exclusions on home sales. The White House has not confirmed details, and critics say the benefits would skew to wealthy households.

Key Takeaways

• Larry Kudlow said he discussed indexing capital gains and bigger home-sale exemptions with Trump, who was "very interested."
• Current IRS rules exclude up to $250,000 in gains for single filers and $500,000 for married couples—limits unchanged since 1997.
• Kudlow floated shielding home sales worth up to $2 million; Trump has separately suggested eliminating capital gains tax on houses.
• Analysts cited by Mother Jones estimate indexing capital gains could add $170 billion to nearly $1 trillion to deficits over 10 years.
• Experts told CNBC that legislative action would be required and changes before the 2026 midterms are unlikely.

What is the Biden inflation tax Kudlow wants to end?

On Fox Business, former National Economic Council director Larry Kudlow and current director Kevin Hassett framed capital gains taxes on inflated asset values as a Biden inflation tax. Kudlow argued empty nesters who owned homes for 30 or 40 years should not pay taxes on gains driven largely by inflation rather than real economic growth.

Supporters writing in The Hill argue reckless Biden-era spending fueled inflation that pushed median home prices up roughly 30 percent, while the Section 121 exclusion for primary home sales has not been updated since Congress set it in 1997. Proponents say taxing paper gains discourages older homeowners from selling, keeping an estimated nearly 5 million needed housing units off the market.

How would Trump's reported home-sale tax break work?

Under current law, qualifying homeowners can exclude up to $250,000 in capital gains from a primary residence sale—or $500,000 for married couples filing jointly—according to IRS rules. Profits above those thresholds face long-term capital gains rates of 0%, 15%, or 20%, depending on income.

Yahoo Finance reports Kudlow has floated exempting sales worth as much as $2 million from capital gains taxes. Trump told reporters in July 2025, "We are thinking about no tax on capital gains on houses." White House spokesman Kush Desai told CNBC Trump is "always exploring new ideas to Make America Wealthy Again," but said policy announcements would come from the administration directly.

Several bills already sit in committee, including the bipartisan More Homes on the Market Act, which would double current exclusions and adjust them for inflation annually.

Who would benefit from ending the inflation tax?

Kudlow insists the targets are not necessarily rich people but longtime homeowners locked into appreciating properties. CNBC cited Yale Budget Lab data showing that in 2022, only about 10 percent of homeowners had gains exceeding the current exemption—and those households averaged roughly $5.7 million in net worth.

Mother Jones notes that indexing capital gains to inflation could deliver 86 percent of benefits to the richest 1 percent, citing 2018 estimates from the Tax Policy Center and Penn Wharton Budget Model. More recent Yale Budget Lab figures cited in the piece put the 10-year cost at $170 billion if indexing applied only to assets purchased after 2025—or nearly $1 trillion if applied to all assets.

Can Trump end the inflation tax without Congress?

Some conservative groups have urged Trump to index capital gains via Treasury Department executive authority. However, CNBC reported that changing the home-sale exclusion would require congressional action, and financial planners called pre-midterm legislative changes "extremely unlikely" given the tight calendar.

For broader context on how economic policy debates are reshaping household finances and market behavior, see our Future Tech & AI Wonders coverage hub. For authoritative reporting on the administration's floating of these ideas, consult CNBC's analysis.