The statutory cap gains rate is 23.8%. But this fails to take account of the inflation tax. The Laffer Center calculates that an asset with a 5% yield that is held over the past five years and then is sold, pays a rate double that after adjusting for inflation – the red line. Notice also in the 1970s because of the inflation tax, the real cap gains rate rose above 100%!

The inflation tax is especially punitive now because of the 21% increases in prices over the Biden years – i.e., Bidenflation. This inflation tax reduces the real rate of return on assets/businesses and is a disincentive to invest. And it’s a disincentive to sell a home or stock (the lock-in effect). This means the tax may never get collected.

Conservatives should add indexing capital gains tax for inflation in their budget bill.