Trump weighs capital gains tax cut as approval slides to 36%

President Donald Trump is weighing a call for Congress to cut capital gains taxes and exempt home sales up to $2 million, as his approval rating slides to 36 percent ahead of November's midterm elections. National Economic Council Director Kevin Hassett said Tuesday the administration is crafting new policy pledges to give voters reasons to back Republicans.

"He wants to hit people with the things that are promises that we're going to do if the Republicans have power in the future," Hassett said in a Fox Business interview with Larry Kudlow, who led the council during Trump's first term. "You can expect a lot more policy between now and the midterms."

Kudlow said he recently discussed with Trump indexing capital gains to inflation, so taxes apply only to an asset's real appreciation, and raising the home-sale exemption from the current $500,000 for married couples. "I spoke to him, he liked the idea of the indexing, he liked the idea of a bigger exemption," Kudlow said. The Congressional Budget Office on Tuesday estimated the federal deficit at $1.8 trillion for the first 10 months of fiscal 2026, partly because the Supreme Court struck down most of the administration's tariffs and forced refunds of duties collected over the past year.

Most tax changes require congressional legislation, making enactment before November unlikely, and the benefits would tilt toward high-net-worth investors, opening Republicans to attacks for favoring the wealthy. White House spokesman Kush Desai said Trump is "always exploring new ideas to Make America Wealthy Again," but any formal announcements will come from the administration directly.

Approval gap widens across swing states

Composite polling from AP-NORC, American Research Group and Pew Research Center puts Trump's disapproval at 59 percent, the widest gap of his second term. His net approval has turned negative in every battleground state, from Arizona and Georgia to Pennsylvania and Wisconsin, ranging from minus 11 to minus 22 points, as high living costs, fuel prices and the war in Iran erode patience with the administration.

History shows tax cuts can lift liquidity

Investors are revisiting two episodes when Washington reduced capital gains taxes and equities responded strongly. Congress cut the top long-term rate from 28 percent to 20 percent in 1997, and the Bush administration lowered it from 20 percent to 15 percent in 2003; in both cases high-growth technology stocks became leading beneficiaries as liquidity strengthened. Inflation also drifted higher in the years after each cut, rising from 1.7 percent in 1997 to 2.7 percent by 1999 and from 1.9 percent in 2003 to 3.39 percent by 2005.

A capital gains cut would raise after-tax returns on equities, making stocks more attractive than bonds and cash and potentially drawing more capital into the artificial-intelligence trade, where hyperscalers are on track to spend roughly $750 billion on data centers, chips and power infrastructure. But if markets conclude that easier fiscal policy will force the Federal Reserve to hold rates higher for longer, the initial boost to technology stocks could reverse, a pattern that has ended speculative cycles before.

Republicans in Congress have floated indexing capital gains, though the issue lacks universal support within the party, while raising the home-sale exemption has backing on both sides of the aisle. With the deficit widening and the legislative calendar short, the proposals are likely to remain campaign promises rather than law before voters head to the polls.

This article is for informational purposes only and does not constitute investment advice.