Selling a Home Is Too Taxing

Indexing capital gains for inflation would free up the housing market and raise billions in revenue

By Jeff Yass and Stephen Moore. Excerpts:

"The tax on investment profits, which runs as high as 23.8%, is based on nominal gains. If you bought an asset 40 years ago for $2,000 and sell it for $6,000, you’ll pay tax on the $4,000 gain—even though the value of the asset has only barely kept up with inflation."

"Americans are sitting on roughly $55 trillion in nominal unrealized gains in the value of homes and other real estate. That’s one reason why, as home values rose during the recent inflationary period, sales declined from more than six million homes in 2021 to a little over four million in 2025."

"Millions of empty-nest baby boomers want to downsize and retire but are discouraged from doing so by the prospect of a huge tax bill. That’s called the lock-in effect of the capital-gains tax. It denies the government massive tax revenue and creates a perverse incentive to store wealth away untouched for decades. A 2020 Brookings Institution analysis put it this way: “Lock-in encourages investors to retain their assets when the economy would benefit from a redeployment of investment capital to higher return ventures or properties.”"

"The Steiger Amendment of 1978, which reduced the top rate from 49% to 28%, had a large unlocking effect. So did the tax cuts signed by Presidents Reagan in 1981 and Clinton in 1997, both of which cut the rate from 28% to 20%."

"When your house passes to your estate, a tax-code provision called the step up in basis at death kicks in, and your gain forever goes untaxed. When your heirs sell the house, they pay tax only on the difference between the value at your death and the sale price."