Trump’s next bill needs tax relief with teeth

A third reconciliation bill is becoming a central question in Republican economic policy. President Trump has called for one. House Budget Committee Chairman Jodey Arrington (R-Texas) supports it. Speaker Mike Johnson (R-La.) is trying to assemble the votes. Ways and Means Chairman Jason Smith (R-Mo.) is open to it if the numbers work.

Senate Republicans sound far less certain. Former Senate Minority Leader Mitch McConnell (R-Ky.) has been blunt: “I think it’s safe to conclude there will not be another reconciliation bill.”

The question congressional Republicans should ask is not merely what they can pass — it’s what they are willing to fight for.

Someone will win that argument. If House Republicans prevail, the real test will be what goes into the bill. Trump is right that defense readiness and election integrity are priorities. But neither is an economic growth agenda. Growth comes from removing barriers to work, saving, investment, and capital formation.

Supply-siders know what they want: lower corporate rates, zero capital gains, full repeal of the death tax, and a complete rewrite of how the tax code treats savings and investment.

Reconciliation in 2026 is not the vehicle for all of that. But it can still do real work.

Index capital gains to inflation

Investors now pay taxes on nominal gains from selling an asset. A family that bought a home in 2010 for $600,000 and sells it today for $1.2 million has not doubled its real wealth. Much of that increase reflects the dollar’s declining purchasing power. Taxing inflation on top of inflation is double taxation by another name. Congress should index all capital gains to inflation.

A practical fallback already has bipartisan support. Reps. Jimmy Panetta (D-Calif.) and Mike Kelly (R-Pa.) have reintroduced the More Homes on the Market Act, which has 123 co-sponsors. The bill would raise the primary-residence exclusion from $250,000 to $500,000 for single filers and from $500,000 to $1 million for joint filers. Those thresholds were set in 1997 and have never been adjusted for inflation.

The 2026 Economic Report of the President identifies supply constraints as a major driver of housing costs. Either reform would reduce the tax penalty that discourages homeowners from selling, moving, or downsizing.

Tax tax-exempt wealth hoards

Universities and hospitals have spent decades accumulating vast tax-exempt wealth while pricing out the people they claim to serve. Harvard’s endowment exceeds $56 billion. Most of its investment earnings remain largely exempt from federal taxation. Economist Richard Vedder has called university tax subsidies one of the most regressive policies in the tax code.

Congress raised the endowment tax as high as 8% in the last reconciliation bill. A 15% excise tax on endowments above $100 million would send a clearer signal that tax-exempt status is a privilege, not a birthright.

The same logic applies to commercial activities at universities and hospitals. When a university runs a hotel, a patent-licensing operation, or a hospital system, it is engaging in commerce. Tax it accordingly.

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Cap Medicaid fraud

Every dollar lost to Medicaid fraud is a dollar extracted from taxpayers and lost to the private economy. Capping federal Medicaid allocations to states with demonstrated high fraud rates is both fiscally sound and pro-growth. It belongs in any serious reconciliation package.

Redirect health care subsidies

The current system funnels public money through insurance intermediaries that extract rents at every step. The 2026 Economic Report of the President documents how lack of competition in physician markets drives up costs. Redirecting health care subsidies directly to individuals would restore price signals to a sector long insulated from them.

Republicans have a narrow window and a thin majority. The votes may not be there. But the question congressional Republicans should ask is not merely what they can pass — it’s what they are willing to fight for.

Every item here removes a barrier to capital formation or productive investment. That is not four different ideas. It is one growth agenda, applied four ways.