Cap Gains Taxation: Less Means More

The Wall Street Journal reports:

Congress is deliberating on what to do about the "Bush tax cuts"—the reductions in income, capital gains and dividend taxes legislated in 2001 and 2003—currently set to expire at the end of this year. The recession may officially be over, but what Washington does on tax policy still matters for an economy that's creating very few net new jobs and is stuck with an unacceptably high unemployment rate and record-high federal budget deficits of over 9% of GDP.

Capital gains taxation is one area in which lawmakers can help jump-start the economy. Capital gains tax rates for taxpayers in the top four income brackets are set to move higher in a few months. My new study, "Capital Gains Taxes and the Economy," published this week by the American Council for Capital Formation, shows that the net effect of lower capital gains taxation is a significant plus for U.S. macroeconomic performance.

The study simulated reductions and increases in capital gains taxes starting in 2011 and extending to 2016 to estimate the effects on economic growth, jobs and unemployment, inflation, savings, the financial markets and debt.