There’s no evidence that a low capital gains tax rate boosts the stock market, investment, or the economy [New]
There is no sound evidence that cutting capital gains taxes to levels far below ordinary income tax rates contributes to economic growth at all — let alone enough to outweigh the significant economic cost of doing so.
- - Federal Reserve economists concluded in 2005 that the 2003 capital gains and dividend tax cut had little effect on the stock market: European and U.S. stocks performed similarly both after the announcement of the tax cut and after the tax cut itself, as this chart shows. As the Wall Street Journal stated, the study “concludes that the tax cut … was a dud when it came to boosting the stock market.”
- - “[T]here is no evidence that links aggregate economic performance to capital gains tax rates,” according to University of Michigan tax economist Joel Slemrod.
- - There is no statistically significant correlation between the top capital gains rate and economic growth (see chart).
- - As Len Burman, Syracuse University tax professor and former director of the Urban-Brookings Tax Policy Center (TPC), has explained of this chart, “Many other things have changed at the same time as [capital] gains rates and many other factors affect economic growth. But the graph should dispel the silver bullet theory of capital gains taxes. Cutting capital gains taxes will not turbocharge the economy and raising them would not usher in a depression.”
- - There is also no statistically significant correlation between the capital gains rate and the amount of real business investment.
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