Gibson's capital-gains tax assertion during debate disputed by economists | Media Matters for America
From the CBO brief:
Because taxes are paid on realized rather than accrued capital gains, taxpayers have a great deal of control over when they pay their capital gains taxes. By choosing to hold on to an asset, a taxpayer defers the tax. The incentive to do that -- even when it might otherwise be financially desirable to sell an asset -- is known as the lock-in effect. As a consequence of that incentive, the level of the tax rate can substantially influence when asset holders realize their gains, as can be seen particularly clearly when tax rates change. ... For instance, the Tax Reform Act of 1986 boosted capital gains tax rates effective at the beginning of 1987. Anticipating that increase, investors realized a huge amount of gains in 1986. Then, in 1987, realizations fell by almost as much, returning to a level comparable to that before the tax increase.
[...]
The sensitivity of realizations to gains tax rates raises the possibility that a cut in the rate could so increase realizations that revenue from capital gains taxes might rise as a consequence. Rising gains receipts in response to a rate cut are most likely to occur in the short run. Postponing or advancing realizations by a year is relatively easy compared with doing so over much longer periods. In addition, a stock of accumulated gains may be realized shortly after the rate is cut, but once that accumulation is "unlocked," the stock of accrued gains is smaller and realizations cannot continue at as fast a rate as they did initially. Thus, even though the responsiveness of realizations to a tax cut may not be enough to produce additional receipts over a long period, it may do so over a few years. The potentially large difference between the long- and short-term sensitivity of realizations to tax rates can mislead observers into assuming a greater permanent responsiveness than actually exists.
First of all, this opinion that you have posted from Media Matters of all places, is the view of the liberal progressive left in this country, and we know that. Nothing new in that, and nothing to back up their assertion that Cap Gains cuts, or Corporate tax relief would only be short term, in fact just the opposite.
The federal government uses tax policy to generate revenue and places the burden where it believes it will have the least effect. However,
the "flypaper theory" of taxation (the belief that the burden of the tax sticks to where the government places the tax) often proves to be incorrect.
Instead, tax shifting occurs. Shifting tax burden describes the situation where the economic reaction to a tax causes prices and output in the economy to change, thereby shifting part of the burden to others.
An example of this shifting took place when the government placed a sales tax on luxury goods in 1991, assuming the rich could afford to pay the tax and would not change their spending habits. Unfortunately, demand for some luxury items dropped and industries such as personal aircraft manufacturing and boat building suffered, causing unemployment for many factory workers. Tax shifting must be considered when setting tax policy.
Do Tax Cuts Stimulate The Economy?
The CBO, although being quoted in true cherry pick fashion by both sides, is as a matter of actual fact often wrong in their assertions due to the fact that the way they are set up to score certain things boxes them in to only the information that any given side of the argument gives them, and can not make their own true evaluation through independent research.
Now, Media Matters well known for cherry picking, and completely out of context argument purposely swayed against anything not in the progressive wheelhouse is disconcerting that anyone would post from them honestly.
It would be to me like taking something from an opinion based right wing source, and passing it off as fact based, like say from the American Thinker. I like their articles, but they are opinion, and should be represented as such.
The other end of that argument that I detest these days is the fallacy of the infallable un named generalization. So before you throw out there that "many", or "most" agree with ANYTHING you have to type in defense of your class war division of this country, know that it is crap before you start.
So stick to facts, and we will all be better for it....Thanks.
j-mac
