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But offering revenue neutral options provides a litmus test for whether that is really the problem advocates for capital gains indexing want to address. Exempting the effects of inflation only from capital gains that are subject to a preferential tax rate, but not adjusting interest deductions also, would increase the incentive to engage in these types of arbitrage games. For example, if I can borrow at 5 percent and invest the money in an asset increasing in value by 5 percent per year, I have done no real saving and earned no real income. But if one wants to lower the taxes on return to saving, would adding indexing services of capital gains to existing tax breaks be the best way to do it?
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