President Donald Trump is exploring new policy initiatives to boost Republican voter support ahead of the November midterm elections, according to reports from Bloomberg. National Economic Council Director Kevin Hassett confirmed that Trump wants to offer voters more incentives to back Republicans, stating "He (Trump) wants to hit people with the promises (of) what we're going to do if Republicans have power in the future." Hassett told Fox Business' Larry Kudlow that "You can expect a lot more policy between now and the midterms." Former administration official Larry Kudlow, who previously led the council during Trump's first term, revealed recent discussions about capital gains tax indexing and home-sale exemptions worth $2 million or less. As per Bloomberg, Trump is considering calling on Congress to cut capital gains taxes as part of his policy pledges for the midterm election.
According to Bloomberg, Kudlow indicated that Trump was particularly interested in capital gains tax indexing, which would adjust taxes for inflation gains. This approach would allow investors to account for inflation when calculating capital gains tax liability. The latest discussions also include expanding or eliminating the capital gains exclusion limit for primary residences, which currently stands at $250,000 for single filers and $500,000 for married couples, unchanged since 1997. The proposal aims to address voters' concerns about cost of living and housing affordability, encourage asset sales to increase housing supply, and stimulate investment activity. Most tax changes require congressional legislation, making it unlikely any of Trump's ideas could become law before the November midterms.
The current long-term capital gains tax rates remain at 0%, 15%, and 20%, with the previous "Great American Rescue Plan" not adjusting these rates. However, proposals like Project 2025 have suggested lowering the top rate to 15% and introducing inflation indexing. If implemented, these tax cuts would lower the costs of holding stocks and real estate transactions, attracting capital into these markets. High-net-worth investors and institutional shareholders would directly benefit, with selling pressure potentially rising in the short term but long-term holding incentives strengthening. Federal finances would face pressure due to a shrinking tax base, with rising deficit expectations, while risk assets may exhibit bullish sentiment under event-driven conditions.
The Congressional Budget Office on Tuesday estimated the fiscal deficit at $1.8 trillion in the first 10 months of 2026, as reported by Bloomberg. This was in part driven by the Trump administration being forced to refund a bulk of its trade tariffs collected over the past year, after the Supreme Court struck down most of Trump's tariffs earlier this year. The growing fiscal deficit adds complexity to Trump's tax cut proposals, as lawmakers express concerns about additional revenue losses amid already strained government finances. The prospect of more tax cuts has elicited a mixed reaction from lawmakers, especially amid the steadily growing fiscal deficit.
According to Bloomberg, reports of potential tax cuts come as Trump and the Republican party race to shore up support, amid a sustained decline in popularity ahead of the November midterms. High living costs, fuel prices, and a protracted war on Iran have soured sentiment towards the current administration. The policy considerations come as Trump seeks new initiatives to present to voters ahead of the November election, with Republicans in Congress having previously floated indexing the capital gains tax, though the issue lacks universal support within the party. As per Bloomberg, Trump and the Republican party are working to shore up support amid the sustained decline in popularity.
