Tags: Fresh | Calls | for | Capital | Gains | Tax | Cuts

Fresh Calls for Capital Gains Tax Cuts

Thursday, 20 September 2001 12:00 AM

Americans for Tax Reform (ATR) and the National Taxpayers Union (NTU) believe that an immediate reduction in the capital gains tax rate would stimulate the economy and provide the federal government with a quick influx of cash to help it cover emergency expenses arising from last Tuesday's terror attacks against the World Trade Center and the Pentagon.

ATR spokesman Jonathan Collegio argues, "I think that the economic evidence is pretty irrefutable, that [is that] it will spur economic growth, and I think that under these circumstances, that is what the country needs more than anything."

"It will probably generate revenue for the government, in a time that it may need more revenue for spending priorities." Collegio said.

He argues that a cut in the capital gains tax "will let capital flow more freely to the places it needs to go," because ATR considers a high rate on investment profits as "a penalty for selling off your assets in the industry that you hold, then selling it off into another industry."

Eric Schlecht, director of congressional relations for the NTU, also said that capital gains tax reductions will spur future economic growth.

Schlecht said past capital gains tax reductions have had an overwhelmingly positive impact upon the economy, and an immediate capital gains tax cut could help the economy and provide needed revenue.

"I think if you look at the history of the last 20 years for instance, of what effect a capital gains tax cut has had on the economy, it significantly stimulates it," he said. "[It raises] the values of stocks, it brings in revenues, which is something that we certainly need."

Schlecht also said the U.S. needs to show its enemies and allies that it is strong both economically and militarily strong, and that a reduction in the capital gains tax would go a long way toward doing so.

"The U.S. is the beacon of economic stability in the world," he said. "If our economy starts to go down, people are going to start losing confidence worldwide in the economy."

The Economic Policy Institute takes a dimmer view of cuts in the capital gains tax, and disputes evidence that cutting the tax rate would stimulate the economy.

"Why should it give a shot in the arm to the economy?" asked EIP Senior Economist Max Sawicky. "Right now, you are going to have a problem with consumption spending because you are seeing layoffs, announcements of more layoffs, you are seeing unemployment going up, [and] the impact of capital gains now is nearly zilch.

"There could be some potential effect on investment in principle," he said. "I think that the strength of such effects in the past has been observed to be extremely weak."

Sawicky argues that the current state of the economy would preclude new spending and investment, such as is being predicted by supporters of capital gains tax cuts, and new debts would undermine benefits that may be gained from those cuts.

"A lot of the benefits would be for people with the money who would be able to spend that money," he asserted. "Capital gains, venture capital, usually is typically focused upon particularly risky stuff. Now, I am not sure it is for the government to decide that we should have more risky investment and less of the non-risky type of investment."

Sawicky also cautioned against the capital gains tax cut because it might reduce government revenues.

"Any revenue loss that you cause with a tax rate has an internal offsetting effect to any investment effect; namely, if that government now has to borrow, that is a drain on the investment pool," Sawicky said.

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Americans for Tax Reform (ATR) and the National Taxpayers Union (NTU) believe that an immediate reduction in the capital gains tax rate would stimulate the economy and provide the federal government with a quick influx of cash to help it cover emergency expenses arising...
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2001-00-20
Thursday, 20 September 2001 12:00 AM
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