The False Promise of Presidential Indexation

41 Pages Posted: 1 Jun 2018 Last revised: 1 Aug 2019

See all articles by Daniel J. Hemel

Daniel J. Hemel

University of Chicago - Law School

David Kamin

New York University School of Law

Date Written: May 24, 2018


The Trump Administration faces mounting pressure from conservative thinkers and activists — including calls from its own National Economic Council director — to promulgate a U.S. Treasury Department regulation that indexes capital gains for inflation. Proponents of such a move — which is sometimes called “presidential indexation” — make three principal arguments in favor of the proposal: (1) that inflation indexing would be an economic boon; (2) that the President and his Treasury Department have legal authority to implement inflation indexing without further congressional authorization; and (3) that in any event, it is unlikely that anyone would have standing to challenge such an action in court. This Article evaluates the proponents’ three arguments and concludes that all are faulty. First, whatever the merits of comprehensive legislation that adjusts the taxation of capital gains and various other elements of the Internal Revenue Code for inflation, rifle-shot regulatory action that targets only the capital gains tax would be costly and regressive, would open a number of large loopholes that allow for rampant tax arbitrage, and would be unlikely to significantly enhance growth. Second, the legal authority for presidential indexation simply does not exist. The Justice Department under the first President Bush reached the conclusion in 1992 that the Executive Branch cannot implement inflation indexing unilaterally, and doctrinal developments in the last quarter century have — if anything — strengthened that conclusion. Third, a number of potential plaintiffs — including a Democrat-controlled House of Representatives, certain states, brokers subject to statutory basis reporting requirements, and investment funds whose tax liability could rise as a result of the regulation — would likely have standing to challenge presidential indexation in federal court. In sum, the promise of presidential indexation turns out too hollow, and calls for unilateral action should be spurned.

Keywords: presidential indexation, capital gains, inflation, indexing, basis

JEL Classification: K34

Suggested Citation

Hemel, Daniel J. and Kamin, David, The False Promise of Presidential Indexation (May 24, 2018). 36 Yale Journal on Regulation 693 (2019), Available at SSRN: or

Daniel J. Hemel

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

David Kamin (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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