Capital Gains: Is it laffer curve or boom and bust that determines amounts of capital gains realized?
As readers of my comments on the Laffer Curve silliness well know, it is not at all established that cuts in taxes increase revenues. In fact, the contrary is empirically the sounder position.
Many of those who argue for low or even zero capital gains taxation do so ideologically--they appear to firmly believe that people with capital should pay no taxes and that only people who labor should pay taxes. They argue that zero capital gains taxation encourages growth and that growth is good for everyone.
Of course, each of those positions is questionable. In a fair society, most of us believe that everyone should pay their fair share of taxes. While we are not always sure what constitutes a fair share, most of us have a sense that fairness requires each to pay from the type of income they have. To exempt capitalists--who most often are the richest in the society and are those with the greatest power to set the tax terms in their own favor--is anti-democratic and elitist. It's not at all clear that low taxes on capital gains increases growth. In fact, it may well be that low taxes on such gains just increases passive investment overseas and has little positive impact here. Even if it somewhat encourages growth, growth is not a per se good--it can be destructive (e.g., the environmental pollution in China), it can appear good in the short term but lead to devastating changes that have not been adequately prepared for in the long term, it can be entirely enjoyed by one segment of the society at the expense of all other segments of society, as the growth in the US economy generally has been over the last few years. On the other hand, equal taxation of capital gains and labor should put the worker and the boss on a more egalitarian playing field, and limit the power of capital to control the terms of work and social life.
Citizens for Tax Justice had a worthwhile discussion of the April Democratic debate between candidates Clinton and Obama. Charlie Gibson Repeats Misinformation at Democratic Presidential Debate, April 18, 2008, CTJ Digest. Most viewers think the debates were handled terribly by the media, in that they spent a considerable amount of time on trivial questions rather than providing an avenue for genuine discussion of issues of interest. But CTJ points out another area of disservice--the commentators got used misleading ideas about taxation to question candidates! Charlie Gibson asked Obama a question about capital gains that mistakenly treated the Laffer Curve idea (cut taxes and you get more money) as credible. Read the story. Then maybe we should all write the mainstream media to insist that they quit parroting misinformation when they address tax issues.

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