I see John McCain has bought into Charlie Gibson's supply-side nonsense, arguing that when capital gains taxes are cut, revenues go up, and go down when the rates are raised. This is the short term effect of changing the capital gains tax rate. If you tell a bunch of wealthy people with accountants that in six months the cap gains rate will go from 15% to 28%, the accountants will recommend that they consider selling equities prior to the rate increase, unless they believe the return will justify the increase. Some capital gains realization does end up moving from the present to the future. Similarly, if you announce a cut, accountants will tell their clients to hold onto stocks for a few more months. But if the cap gains rate goes up and stays that way, there's no reason to think suddenly people will decide to stop buying and selling stock.
And the let's end the faux populism from the right about stock ownership. Most middle class stock ownership is already in . The people who pay capital gains tax are overwhelmingly super-rich. The top 1% of America earns something like 9% of the income, but pays 72% of the capital gains taxes.
The notion that capital gains are a major concern for most American taxpayers is just specious. Almost all of the stock owned by Americans who are not wealthy are held in 401(k) plans which accumulate gains in a tax free manner. Why capital gains should be taxed at considerably lower rates than work is something I'd love to hear St. John be pressed on a bit.
Posted by: Sir Charles | April 21, 2008 at 10:05 AM