Search Our Site

Custom Search

October 11, 2010

Capital Gains Taxes: In Other People's Words

In Other People's Words is a new segment I want to try out once per week, where I write an article based solely on quoted material. References to the material will be linked in the article.

Capital Gains Taxes: In Other People's Words

"In general, there is significant consensus that broad-based reductions in taxes on capital have the potential to boost economic growth over the long run. Reductions in capital taxation increase the return on investment and therefore the formation of capital. The resulting increase in the capital stock yields greater output and higher incomes throughout much of the economy."

"Economists have debated for years how a higher capital gains tax rate affects receipts from the capital gains tax. However, perhaps more important for federal revenues are the deleterious effects on the real economy—reduced total income, output, and jobs—arising from a higher capital gains tax rate."

-J.D. Foster's article for The Heritage Foundation

"Another strange feature of the tax is that individuals are permitted to deduct only a portion of the capital losses they incur, whereas they must pay taxes on all of the gains. When taxpayers undertake risky investments, the government taxes fully any gain they realize if the investment has a positive return. But the government allows only partial tax deduction (of up to three thousand dollars per year) if the venture results in a loss. That introduces a bias in the tax code against risk-taking."

-Article from Stephen Moore, posted on the Library of Economics and Liberty website

"Moreover, the actual revenue received from a capital gains tax is disproportionate to the burden imposed. The Congressional Budget Office (CBO) reports that in 1990 capital gains tax receipts totaled $32 billion, making up just 6.8 percent of total individual income tax receipts. By 2000, this number rose to $119 billion, making up 11.8 percent of the total. Notwithstanding the current economic meltdown, CBO estimates that for 2008, capital gains tax receipts will be close to $106 billion, making up 9.2 percent of the individual income tax receipts. While discouraging economic growth and driving investors across the Atlantic, receipts from the capital gains tax are barely making a dent in government revenue."

Popular This Month