Such was a moderater claim during the PA Democratic debate last night. Is it true? Do lower capital gains taxes increase revenues and higher capital gains taxes raise revenues?
Or were such both merely functions of other correlated variables?
I cannot imagine that such is indeed simply linearly related. Obviously, the lowest capital gains tax, zero, would raise the least revenues. More likely there is, for each economic environment, an inverted U - lower than which and higher than which lowers revenues.
Anyone with more knowledge to bear than my guessing?
IMO, the simplification of the tax structure around 1980 did contribute to an increase in revenue, as people make decisions based more on economics and less on tax. But the argument that lowering taxes to around %10-%20 from %20-%30 will help the economy so much that you will gain more in revenue is not supported by the experience of the past ~30 years.
Just looking at it from a tax revenue perspective, if the money does not return a better rate in the economy than you’d get from paying off the national debt, you’ve just thrown away that money without helping the government revenue at all. While most of the time investing by the private sector would, there are exceptions such as airlines and dotcoms.
And of course there is the question of how long do you have to wait for the increased revenue? If the extra investment happens too quickly it will likely be far from ideal returns, and we know what we are in the long run.
OTOH, some make the argument that lowered taxes prevent unethical behavior, by making outright cheating or using foreign tax shelters marginally unattractive. The solution to that is tighten up the laws and hire more enforcers.
Here’s a supply-sider talking about the Treasury info: link. Please note that even a supply-sider doesn’t try to pretend that it’s as simple as “lower rate = more revenue”.
It looks like Gibson picked up some Dittohead talking point and tried to pretend it was real. That’s what I thought last night and that’s what I still think.
I found the moderators very, very, very annoying in the little I managed to watch last night.
Quit asking stupid questions, and quit arguing with the debaters!! You’re supposed to be moderating the debate, not making your name as a “hard-hitting journalist”. Gah!
“Is Reverend Wright more patriotic than you?”
“Well, let’s see, I’m a 17.3 on the patriotism scale. Reverend Wright is only a 16.5, so he’s slightly less patriotic than I am. However, please note that Ronald Reagan was only a 12.8, so it’s all a bit relative.”
I don’t think it’s known because you can’t isolate one variable. You can’t run the period 1990-2000 with one rate and then run that same period exactly the same except with a lower rate and then see the affect of tax rates in isolation of other factors.
You can get transitional revenue jumps with taxes like capital gains when change is expected. Since the tax is levied on realisation not accrual, deferral of realisation and thus liability is a big part of tax planning. If you know a rate cut is coming it will make sense to delay whatever realisations you may wish to make a little longer.
This does not of course mean that there will be a permanent increase in revenue.
But you were righter.