Cruz bill proposes CPI indexing of capital gains basis, targeting $1 trillion revenue impact over decade

The proposal alters nominal gain calculations under IRC Section 1001 by inflating historical purchase prices in line with official CPI data. CRS data shows two-thirds of capital gains realizations derive from corporate equities while real estate accounts for roughly 30 percent, concentrating benefits among higher-income filers who report the bulk of long-term realizations. Current code already taxes nominal appreciation, producing effective rates above 100 percent in nine years since 1957 when inflation outpaces real returns.

Indexing all existing assets would reduce federal receipts by nearly $1 trillion over ten years according to Yale Budget Lab modeling, while limiting the change to post-enactment purchases yields an estimated $170 billion loss. Peterson Foundation figures indicate capital gains taxes supplied about 10 percent of 2025 receipts amid $40 trillion debt. The two-sided ledger shows revenue contraction offset by potential increases in realized transactions and domestic capital allocation.

Treasury has not responded to the March letters. Legislative history shows prior indexing attempts failed in the 1980s and 1990s over distributional concerns. Implementation via regulation would require Treasury reinterpretation of statutory basis rules without new appropriations.

Passage hinges on reconciliation procedures or standalone bill support in both chambers before the 2026 election cycle alters committee control.