, stats Top capital gains tax rates & economic g.jpg
Then make the taxes more equitable across the board.
When Obama pushed for the Bush tax reductions to be extended to all but the top 2%, Congress, lobbyists, pundits, and news commentators went irate, screaming unfair "class war" and an assault on our beneficent job-creators. The fact that taxes on investment income, capital gains, and a million banking loopholes, are taxed at a much lower rate than income taxes shows how legislators favor these people.
Now tax laws are conceptually also geared to encourage good economic behavior. Encouraging people to invest in US businesses and domestic economic activities is a good thing. Unfortunately, comparing capital gains tax rates and economic growth in America from 1950 to 2011, economist Len Burman found "no statistically significant correlation between the two", even after using a "lag times of five years." Burman shared his data (shown in this chart) with several economists but none came back having discovered a historical relationship between the rates and growth over those six decades. According to Burman, "If they found the relationship, they’re saving it for a special time."
There also appears to be "little or even a negative" correlation between capital gains tax reduction, and rates of saving and investment, according to economist Thomas L. Hungerford of the nonpartisan Congressional Research Service.
"Saving rates have fallen over the past 30 years while the capital gains tax rate has fallen from 28% in 1987 to 15% today .... This suggests that changing capital gains tax rates have had little effect on private saving".
Studying economic growth and changes to the top marginal tax rates for capital gains (and other personal income) from 1945 to 2010, Hungerford found, "The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the pie." http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States
- Top tax rates on long-term capital gains and real economic growth (measured as the percentage change in real GDP) from 1950 to 2011. There is no apparent relationship (correlation = .12) between low capital gains taxes and high economic growth or vice versa. Source: Burman, Leonard, Tax Reform and the Tax Treatment of Capital Gains, House Committee on Ways and Means and the Senate Committee on Finance, 20 September 2012. http://www.finance.senate.gov/imo/media/doc/092012%20Burman%20Testimony.pdf