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here. The issue discussed below, about yet another gimmie to the rich via a proposed tax law change, illustrates a problem in the US generally, of tax complexity. Tax policies ought to be debated in the press and in political campaigns as much as programs. How redistributive or wealth-enhancing government activity is depends in significant measure on how each of regressive taxes and spending policies are. For instance, EU member states typically have regressive tax systems due to their fondness for VAT, but (historically) very progressive spending, and so are net progressive.
But because taxes are boring to most, and even more so in the US where the tax system is unduly complex in order to enrich an industry of tax preparers and accountants and very highly paid tax lawyers, the level of media interest is to get outraged periodically about how little some companies and individuals pay in taxes, and to ignore the sausage-making that made that possible.
By Beverly Moran, Professor Emerita of Law, Vanderbilt University. Originally published at The Conversation
Not long after U.S. housing prices reached a record high this summer – the median existing home went for US$435,000 in June – President Donald Trump said that he was considering a plan to make home sales tax-free.
Supporters of the idea, introduced by U.S. Rep. Marjorie Taylor Greene as the No Tax on Home Sales Act in July, say it would benefit working families by eliminating all taxes on the sales of family homes.
But most Americans who sell their homes already do so tax-free. And the households that would gain most under Trump’s proposals are those with the most valuable real estate.
As a legal scholar who studies how taxes affect racial and economic inequality, I see this proposal as part of a familiar pattern: measures advertised as relief for ordinary families that mostly benefit the well-off.
Most Families Already Sell Their Homes Tax-Free
Right now, according to the Internal Revenue Code, a single person pays no tax on the first $250,000 in gain from a home sale, while married people can exclude $500,000. All told, about 90% of home sales generate less than $500,000 in gains, so the overwhelming majority of sellers already owe no tax.
The minority who would see new benefits from the proposed tax change are those with more than $500,000 in appreciation – typically owners of high-priced homes in hot real estate markets. Yale’s Budget Lab estimated the average benefit for these tax-free sales was $100,000 per qualifying seller.
Homeownership itself isn’t equally distributed across the U.S. population. About 44% of Black Americans are homeowners, compared with 74% of white Americans. That racial gap has only widened over the past 10 years. Similarly, single women – particularly but not exclusively women of color – face additional barriers.
A Broader Trend of Upward Wealth Transference
Though still just a proposal, the tax-free home sales bill is part of a broader set of Republican tax plans that would have regressive effects – that is, where the vast majority of benefits go to high-income people and very few to low-income people – under a pro-worker banner.
Trump floated the tax-free home sales idea less than three weeks after he signed a large package of tax and spending measures in July 2025. That bill generated strong public criticism because of its emphasis on tax savings for the rich at the expense of almost a trillion dollars in cuts for federally funded health care for the poor and disabled.
The home sales idea follows the same script – and echoes the distributional pattern established by his 2017 Tax Cuts and Jobs Act. That tax reform increased racial wealth and income disparities and provided 80% of its benefits to corporations and high-income individuals. In fact, my research shows that white households received more than twice as many tax cuts as Black households from that law.
The same dynamic plays out in this new tax-fueled housing policy. Eliminating capital gains taxes on home sales would primarily benefit the 29 million homeowners who already have substantial equity – a group that skews heavily white, male and upper middle class. Meanwhile, America’s millions of renters, disproportionately people of color and women, would receive no benefit while potentially losing access to social programs Congress must cut to fund these tax breaks.
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Marjorie’s bill does not get at a ‘real estate transfer tax.’ Her bill reads:
“To amend the Internal Revenue Code of 1986 to eliminate the dollar limitations on the exclusion of gain from sales of principal residences, and for other purposes.”
A local real estate transfer tax has nothing to do with capital gains. In fact it discourages anti-social activities life flipping. There is more than one way to curb speculation…and make the rich pay. They can take their laundered cash to the Caymans, but they can’t take their mansions.
Huh? It’s not clear who you’re quoting (‘real estate transfer tax’). MTG is trying to eliminate the capital gains tax on primary residence sales, which currently applies exclusively to the megarich class of her parasitical donors.
It appears that the first paragraph of this article begins cut-off, it starts with “here.”
Perhaps stop depreciating the currency first.
Stuck at $500,000 since Clinton times, my hometown of San Diego sports average home prices at $1M.
What happens when rates ease further, I think no lower than 5%. Still low sales and rising prices!
No SFH construction here. Get in line for a $2500 1BR apt. No condos either.
At least index for inflation -> naw too complicated.
A significant bump is due. It won’t benefit that many people cuz people aren’t selling. Here.
Would benefit white households over black, blue states more than red, and boomers more than younger cohorts.
I wonder if the “and other purposes” means this would apply to commercial real estate sales.
I would like to discuss another tax-benefit for the wealthy: the granting of stock options. As best as I understand, when granted a stock option, the employee pays no taxes on that grant: taxes are only owed when the option is exercised on the difference between the fair market value of the stock price and the exercise value of the option. Options, however, have value, even when they are out-of-the-money, as would be case for most stock options.
The proxy statement for Nvidia shows a fair value of $16.7 million for the fair value of the potential 95,000 to 286,000 shares of stock awarded to CEO Huang. Is this an untaxed benefit?
I am not an expert in executive compensation and would welcome comments from those with tax expertise.
It’s possible to get clobbered by the alternative minimum tax in that situation.
What do studies show about freed-up equity that homeowners might now access? There are so many stories about house-poor people hanging on due to the high tax bills. More transactions should help redirect larger families into those houses while facilitating some downsizing and relocation elsewhere by older single or two person households. Multiplier effects help, too. Not perfect but good on the margin.
What’s really a “gain” when people are constantly throwing money into the place?
These days here in Honolulu median condo is US$525,000. Prior to1997 sellers could roll over the cap gain if they purchased qualifying home, much like 1031 exchange.
People here don’t sell, as in the single family market homes get configured so children and grandkids can live there too. (Judging by the number of cars I see parked, even townhomes look to be multi-generational).
So my house which we bought in 82 for $172k is now around $1.2m. Even with adjustments to basis for improvements, that’s a hefty tax. And the way tax works, even if you argue none of the gain was “earned” so no right to complain, recognizing the gain increases your tax on any other income including social security.
The capital gains exclusion for primary home owners should have been indexed to inflation from the start. Goal of updating the tax is to free up housing because a lot of baby boomers are in housing which is oversized for current needs. I’ll attest to this as selling the house triggers a massive tax bill. It’s not a fancy house but is located in a community with exploding property values. As is, the house will pass to heirs who will get stepped up basis as additional boon. So, they get a tax break which circles back to the reason to update – free up housing for younger families.