Business
Commentary: Ted Cruz and his GOP colleagues are pushing yet another tax break for the 1%
America’s beleaguered 1%, backed by their supporters in Congress, are pleading for your sympathy.
They say they’re treated unfairly by the federal tax code, you see, because inflation has sapped the value of their most cherished tax break, the preferential tax rate on capital gains. And they want it fixed.
Inflation, says Sen. Ted Cruz (R-Texas), the leading proponent of this idea, has been “turning gains into an unfair tax burden.” Last year, he proposed to rectify this injustice via the Capital Gains Inflation Relief Act of 2025.
That was a rerun of similar bills he introduced in 2018 and 2021. None of them passed, so this time around, he’s proposing to circumvent Congress entirely by persuading President Trump to enact the break by presidential fiat.
The argument proponents make sounds logical until you think about it.
— Steve Wamhoff, Institute on Taxation and Economic Policy (2019)
The reaction by legal and economic experts outside the GOP echo chamber has been overwhelmingly negative. Whether Trump could enact the tax break via executive order is dubious , they say, and in any event the break is unwarranted and economically unwise.
“The argument proponents make,” wrote Steve Wamhoff of the Institute on Taxation and Economic Policy in 2019, “sounds logical until you think about it.” The legal and economic considerations haven’t changed since then.
As Wamhoff observed, there’s a certain amount of superficial logic underlying the argument that inflation in effect raises the tax rate charged on capital gains — the profits investors pocket from increases in the value of their stocks and bonds over time.
That’s because of how the gain is calculated. The math starts with the “basis,” the price originally paid for the asset, and proceeds to the final sale price. The difference is subject to the capital gains tax.
If the asset has been held for more than a year, the gain is taxed at a rate that tops out at 20%. This year, the rate is zero for taxpayers with income up to $48,350 ($96,700 for couples) and 15% for those with income up to $533,400 ($600,050 for couples). The top rate of 20% kicks in for those with incomes higher than that.
Gains on assets held for less than a year are taxed at the higher rates due on ordinary income, which this year top out at 37% on incomes over $640,600 ($768,700 for couples).
The issue raised by the proponents of change is that the basis is calculated on a pre-inflation value, but the gain on post-inflation values. Therefore, they assert, at least some of the gains reported by investors are due not to real advances in an asset’s value, but to inflation. They say no one should be taxed on inflation.
To illustrate, if you bought a share of stock for $5 a decade ago and then sold it for $9, your capital gain of $4 is subject to the tax. But if the value’s increase matched the inflation rate over that period, Wamhoff noted, “you have not genuinely profited.” Indeed, if your gain was less than the inflation rate, you might even be charged tax on an inflation-adjusted loss.
The remedy that Cruz proposes is to adjust the original basis for inflation. Say that due to inflation alone, that share of stock might have gained $3 in value. If one raises the basis by $3, the real taxable gain would be $1, not $4, quite a difference for the taxpayer.
There are a few problems with this narrative. Among the chief rationales for the lower tax rate on capital gains is to counter the effect of inflation. Adding the inflation indexing of the basis would mean accommodating inflation twice.
Another issue would be finding the right inflation index. Proponents of indexing typically cite the consumer price index, but that’s only one of numerous inflation measures the government calculates. Because the index tracks changes in the price of purchased goods, it’s not necessarily the right measure to adjust the values of capital assets such as stocks and bonds.
Then there’s the question of why only capital gains should be singled out for a special inflation adjustment. “Inflation distorts all forms of capital income and expense, not just capital gains,” observed Elena Patel of the Brookings Institution earlier this month. “Interest, dividends, rents: all of them partly reflect inflation.”
The impact of this change on the federal budget can’t be overlooked. The cost over 10 years, according to the Yale Budget Lab, would be $169 billion if the indexing rule were imposed only on newly purchased capital assets, but nearly $1 trillion if it were applied retrospectively to stocks and bonds already held by investors.
Also at issue is whether America’s rich really need another tax break. The tax cuts delivered by Republicans and Trump in 2017, during his first term, are estimated to be worth $1.5 trillion or more over 10 years. They were made permanent by the GOP budget bill enacted last year; the fiscal hawks at the Committee for a Responsible Budget estimate the cost of those provisions at more than $2.4 trillion over the next decade.
All that comes on top of a general reduction in top marginal federal income tax rates that have reduced them to the lowest level in a half-century.
As for the assertion by Cruz that inflation “will boost savings, spur investment, and create jobs nationwide,” there’s little evidence for that. Economists generally have calculated that whatever economic growth could be ascribed to the change would be washed out by the revenue loss from inflation-indexing only new purchases, and utterly swamped by the cost of indexing all holdings, past and future.
Nevertheless, Republicans have been relentless in trying to secure this tax break for their rich patrons. Legislation to enact the indexation of capital gains taxes was introduced in 1978, 1983, 1994, 1997 and 1998. Cruz introduced his own bills in 2018, 2021 and 2025.
All those efforts flopped in Congress. Accordingly, the advocates of inflation-indexing of capital gains have dusted off a workaround that first surfaced in 1992, during the George H. W. Bush administration. This is for the Treasury to rule on its own authority that “basis” means “inflation-adjusted cost.”
The Department of Justice and the Treasury subjected the question of whether the change could be made without congressional action to their gimlet-eyed scrutiny, and turned thumbs-down. “Not only did I not think we could, I did not think that a reasonable argument could be made to support that position,” then-Atty. Gen. William Barr said later. The Bush administration dropped the idea.
But Cruz, along with Sen. Tim Scott (R-S.C.) have urged Treasury Secretary Scott Bessent to revive it. Eight Republican lawmakers joined the parade, asserting in a March 5 letter that such a move would be “a straightforward administrative action grounded in fairness and sound tax policy.” (The Treasury Department didn’t respond to my request for comment.)
It should go without saying that with Democrats campaigning on an “affordability” platform, this idea sounds like political poison. It’s impossible to see it as anything other than a handout to the rich. How do we know this? Because it’s only the rich who have any significant exposure to the capital gains tax.
According to IRS data, about 75% of the income of the median American household, which earned about $84,000 in 2024, came from wages and only about 1.1% from capital gains. In the wealthiest households — those with $10 million or more in annual income— only about 12% came from wages but nearly half came from capital gains.
That may understate the value of capital gains for the wealthy. As Ed Kleinbard, the late taxation guru at USC, was fond of pointing out, the capital gains tax is our only truly voluntary tax. That’s because no one has to pay it until they sell the asset. If they hold it until their death, their heirs pay nothing, thanks to the “step-up” in basis for inherited wealth, which revalues the asset to its price as of the death of the owner, extinguishing the tax forever on what could be decades of gains.
After 48 years of unsuccessful politicking, one might be tempted to call the idea of indexing capital gains a certified washout. But when it comes to the GOP’s cherished hobby horses, it’s always too early to tell.
Bruce Bartlett, who served as an adviser to the Reagan and H. W. Bush administrations but has since become a most percipient critic of modern GOP economic nostrums, says the GOP’s peculiar genius is to keep even its unpopular policies simmering away in the expectation that, at some point in the future, a window will open up to get them enacted. That’s how they got abortion rights rescinded by the Supreme Court in 2022 — after 49 years of fighting against Roe vs. Wade.
When a GOP proposal fails to pass, Bartlett told me, “They put it on the shelf when the time isn’t right and when the situation changes they pull it off the shelf, dust it off, and they are ready to go again. … The left doesn’t do this. It waits until the political opportunity is ripe to even begin preparing. By the time they are ready, the opportunity has passed.”
The Republican fixation on relieving their rich patrons of the burden of capital gains taxes isn’t surprising. As I’ve reported in the past, the capital gains preference rate is the most valuable tax break the wealthy receive.
That’s because, in addition to being voluntary, as Kleinbard noted, it’s uncapped — unlike, say the deduction of mortgage interest.
This proposal doesn’t make sense even on its own terms. Isn’t it time for the proponents to drop the subject already?
Shares in Elon Musk’s rocket company SpaceX halted their three-day slide that had erased roughly $600 billion off its market value.
SpaceX shares closed at $156.11 with a nearly 1% gain on Tuesday, a slight recovery from a 16% fall on Monday.
That loss dropped the stock below $160.95, where it ended the day June 12 after a 19% surge during its record initial public offering. The IPO gave it a market cap of $2.2 trillion, making SpaceX one of the world’s most valuable public companies.
It also turned Musk into the world’s first trillionaire, a status he retains despite the sell-off.
The downturn probably reflects investor unease over the company’s spending plans and potential debt load, analysts say.
SpaceX raised a total of $86 billion after underwriters exercised their right to sell additional shares, on top of the $75 billion initially raised. It was the largest IPO in history.
A little more than half a billion shares were distributed to institutional and retail investors at a price of $135, with the stock opening at $150 as some holders immediately flipped shares for a profit.
Shares rose as high as $176.52 during the IPO before settling at the $160.95 price. In the weeks since, shares reached a high of $225.64, meaning that some investors lost money or are underwater with paper losses.
Since the IPO, SpaceX has dropped some big bucks.
It announced last week that it was acquiring AI coding startup Cursor for $60 billion in a deal expected to close in the third quarter. The San Francisco company, founded in 2022, enables engineers to instruct software in English to run coding tasks autonomously.
It also sold $25 billion in bonds on Tuesday , unusual for a company that just went public, much less for one that just raised a record sum.
The IPO surpassed the 2019 offering by Saudi Aramco, Saudi Arabia’s state-owned oil giant, which raised $29.4 billion, the prior record holder.
S&P Global issued a report last week that assigned SpaceX a “BBB” credit rating, the lowest possible rating to qualify as an investment grade credit risk. It noted the company will have “elevated capital expenditure” through 2029.
SpaceX rivals OpenAi and Anthropic filed this month for initial public offerings that, while not expected to be as large as Musk’s company, will be large in their own right.
Wedbush analyst Dan Ives, who has been bullish on SpaceX stock, said the market is digesting “massive debt and equity raises from Big Tech players” in the coming years.
“This is part of an industry wave of debt offerings on Wall Street, like Alphabet and SpaceX among others,” he wrote in an email.
With the stock already giving up gains since the IPO, it will be further tested when tranches of locked-up shares held by current and former employees are released.
At least 20% of the shares will be released after second-quarter results are disclosed sometime in the coming months, with all the lockups expiring in December.
SpaceX, based in Texas, is the leading launch services company in the world, with its Falcon 9 rocket accounting last year for the vast majority of satellites sent into space.
It is also the leading satellite-based broadband provider with its Starlink service. But the extraordinary interest in the IPO was driven by Musk’s plans to make the company an AI leader — including plans to launch orbiting satellite data centers powered by the sun that crunch AI data.
He merged his xAI artificial intelligence company into SpaceX this year, with the combined entity recently announcing it was leasing computer power to rivals Anthropic and Google at two terrestrial data centers it has constructed.
Musk moved the company’s headquarters from Hawthorne to Texas in 2024, but it retains large operations in the South Bay city and blasts off regularly from Vandenberg Space Force Base in Santa Barbara County.
Investment research firm Morningstar placed a $780-billion valuation on SpaceX, focusing on its core rocket and Starlink broadband satellite businesses. It suggested investors wait a few months for the stock to settle before buying in.
“I think the day-to-day stock price movements are usually based on market sentiment,” said report co-author Nicolas Owens, an equity analyst at Morningstar. “So I was not surprised when it went way up right after the IPO — and I’m not surprised it [came down]. Not much has really changed in the fundamentals.”
Mike Alves, founder of Pasadena’s Vida Vision Fund, has a stake in SpaceX that accounts for 46% of his AI and robotics fund.
He said he was not perturbed by the stock drop, noting that Facebook fell under $18 a share just months after its May 2012 IPO closed at $38 a share. It has since risen more than 1,000% above its offering price.
“The volatility doesn’t really matter because you’re going to multiply your best investment many times, so I’m not so worried about it,” he said, adding that investors seeking shares could now “scoop them up at a good deal.”
The nation is awash in data center hate and California is no exception.
Temporary bans have cropped up across the state as residents from Imperial County to San José fight proposals in their communities. Monterey Park became the first city in the country earlier this month to permanently ban data centers by a popular vote. And a recent poll sponsored by the environmental group Net-Zero California showed 70% of state residents don’t want data centers in their communities.
But unlike in Virginia, Texas, Ohio and other states where residents are fighting 400-plus megawatt hyperscaler facilities in their backyards, California has some major barriers keeping data centers at bay.
Sky high industrial electricity prices are more than double the national average. Long wait times to connect to the grid have some new data centers sitting empty in Silicon Valley. And the state regulates the size of the backup generators that keep the centers running when the grid goes down. That has limited most facilities to a fraction of the size that artificial intelligence increasingly demands.
That all means that California is seeing less of a boom — fewer proposed data centers, and smaller in size — than in the country’s hot spots.
“California isn’t even on the map today,” said Mehdi Paryavi, chairman of the International Data Center Authority. “Taxes are high, land is expensive, water is scarce, energy is difficult to find, communities are pushing back. There are all kinds of problems.”
Northern California and Southern California were hubs for an earlier generation of data centers. “But over time, as the sector has grown, the overwhelming majority has been developed elsewhere,” said Andrew Batson, head of data center research at real estate intelligence firm JLL.
“Almost all the data center demand being generated from California is being serviced by adjacent states,” from places such as Phoenix and Las Vegas, Batson said, “where power is much cheaper, land is more affordable, and regulations are quite less.”
Still, “California can’t outsource all it’s data center capacity,” and the state expects to see growth over the coming years.
Fifty-one facilities are currently planned in the state, according to a recent study from the Pew Research Center, an 18% increase over the 277 operating today. According to a study from UC Riverside, data center electricity use in the state doubled between 2019 and 2023.
But some grid operators elsewhere are already seeing overwhelming loads, such as the Pennsylvania-New Jersey-Maryland Interconnection that expects about 40% to be added to its total demand, largely from data centers, by 2035. Compare that to the California Energy Commission which expects data centers to drive an increase of about 2 gigawatts by 2030, and 5 GW by 2040. That’s about 4 and 9% of its 52 GW peak load respectively.
“It’s a significant amount of demand growth, but it’s not dwarfing all the other factors,” said Mark Specht, a senior energy manager at the Union of Concerned Scientists who put out a report on California data center growth last month. “Some of the projections we’re seeing for increased electricity demand from electric vehicles in 2045 is actually higher than the demand from data centers.”
California regulations are part of what’s keeping data centers relatively small: A state rule requires any backup generator bigger than 100 megawatts to be certified as a power plant.
Specht’s report found none of the current data centers in California and almost none of the proposed ones require that certification because they fall under the 100 MW cap. (Exceptions include a 417 MW planned facility in Santa Clara and a 330 MW one in Imperial County blocked Tuesday by a moratorium vote.)
One hundred MW could power a small city’s peak demand, yet the average U.S. data center is expected to demand over 600 MW by 2030, according to the energy intelligence company Cleanview.
A San Francisco Chronicle analysis showed that California facilities currently make up about 5% of national data center power demand, but that share is expected to fall to 1% if building proceeds as planned across the country.
Still, the growth that does exist is raising concerns among utility ratepayer advocates and environmentalists, not to mention the general public.
“There are real costs at stake,” said Mark Toney executive director at The Utility Reform Network, a ratepayer advocacy group.
He noted Pacific Gas & Electric anticipates a massive amount of new demand from data centers — about 10 GW worth — or enough to power 7.5 million homes. That would require grid upgrades he estimates at about $10 billion, partly borne by ratepayers. Interest has been high in PG&E territory because it serves the San Francisco Bay area, where California’s projected data center buildout is concentrated around San Jose, now that Santa Clara has reached capacity.
Data center electricity projections come with uncertainty, and PG&E says its confirmed large load in the pipeline — mostly data centers — is closer to 5.3 GW.
Whatever demand materializes, TURN and others are fighting to shield ratepayers from the costs of PG&E’s buildout, a battle playing out at the Public Utilities Commission.
PG&E spokesperson Rob Stillwell said data centers help reduce rates by spreading the costs of grid maintenance over more customers. He noted data centers already have to pay the up front costs of connecting to the grid, under a temporary rule.
But TURN says those don’t include all of the infrastructure and broader grid updates that PG&E will have to invest in to support data centers.
And the rule only applies for PG&E territory and doesn’t require data centers to bring their own clean power.
TURN is now backing a bill from State Sen. Steve Padilla (D-Chula Vista) that would require all data centers to pay for 100% of the costs of new transmission upgrades as well as new clean energy to cover at least half their required electricity. The industry is opposing the effort.
Another Padilla bill would approve data centers faster if they use more clean energy. One from Assemblymember Rebecca Bauer-Kahan (D-Orinda), would require data centers to disclose their energy use to the state. And bills by Assemblymember Diane Papan (D-San Mateo) would require them to project and report their water use as part of permitting and licensing.
Yet politicians have been hesitant to regulate. Last year, similar bills were either watered down, didn’t make it through the legislature or were vetoed by Gov. Gavin Newsom.
At a panel in January, gubernatorial candidates were asked how they would balance environmental concerns about data centers with their potential to drive economic activity.
“We have to make sure that those data centers are paying their fair share,” said Xavier Becerra, adding that businesses need to move away from diesel backup generators.
Former candidate Tom Steyer of San Francisco answered with a dodge or a dose of realism, depending on your view.
“What data centers are looking for is cost to compute and speed to compute, and the good news is that California’s energy is so expensive on a cost basis, they’ll never come here,” Steyer said. “We may talk all we want about data centers, but they’re not coming.”
Bed Bath & Beyond is looking to stage a comeback as the decades-old company reopens stores in partnership with the Container Store in 22 cities, including two in Southern California.
To the delight of die-hard fans and coupon collectors, for a limited time the new stores will accept the chain’s blue and white coupons, no matter how old they are.
Customers can use their expired coupons until July 13. The company is also holding a contest to find the oldest coupon out there, with a prize of a home renovation worth $100,000.
“For decades, our customers treated these coupons like treasure,” said Bed Bath & Beyond Inc. President Amy Sullivan in a statement Monday. “They tucked them into purses, filing cabinets, cookbooks and memory boxes because they believed they would be valuable someday. We think they were right.”
Bed Bath & Beyond, which sells home goods including towels and kitchen gadgets, filed for bankruptcy in 2023 and shut down all its locations. Following its bankruptcy, Bed Bath & Beyond was bought by Overstock.com, which has since rebranded to Beyond, Inc.
The company announced the first phase of its brick-and-mortar reopenings last week. In addition to stores in New York, Colorado, Illinois and other states, two locations will open in California in the coming weeks in Costa Mesa and Century City in Los Angeles.
Over the last few years, social media users lamented that they could not use their expired Bed Bath & Beyond coupons.
“Found my entire stash of Bed bath and beyond coupons today,” one Reddit user said earlier this year. “Sad I never got to use them.”
Another Reddit user said they found a large stack of expired coupons two years ago. “I know I should probably toss them out at this point, but they were fun to collect,” they wrote.
In 2025, Beyond, Inc.’s executive chairman Marcus Lemonis vowed he would never reopen stores in California due to the “over-regulated, expensive” business environment. He ruled out future retail stores in the state in a statement posted on X last August.
Less than a year later, however, the company announced 12 planned storefronts in the Golden State, including five in Southern California. The new stores, dubbed Bed Bath & Beyond + The Container Store, will offer home organizational products as well as bed sheets, pillows and more.
Gov. Gavin Newsom welcomed the retailer back to the state.
“With a thriving economy growing faster than all other developed nations, California always reaches out with an open hand — not a closed fist,” he posted on X in April.
The Container Store filed for bankruptcy in 2024 and emerged from it in early 2025. Bed Bath & Beyond acquired the Container Store in April for about $150 million in stock and convertible notes, part of the company’s attempt at a comeback after its own bankruptcy.
“Our customers don’t think about their homes in categories,” Lemonis said in a statement. “By bringing Bed Bath & Beyond and The Container Store together, we’re creating a destination where customers can buy products, organize their spaces, design custom solutions and access services all under one roof.”
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