Wednesday, October 22, 2008

Senator McCain repeated today the misleading claim: “History shows that cutting [the capital gains] tax rate actually yielded more revenue to the government.” It is true that a temporary cut on capital gains will often lead to a short-term spike in people selling assets and realizing capital gains. This burst of capital gains realizations may increase revenue that first year – but at the expense of lower tax revenues in future years because there are fewer capital gains left to be realized. In other words, a cut in capital gains taxes has more in common with government borrowing (where future deficits rise) than with the Laffer curve (where tax cuts reduce future deficits).

It is also ironic that Senator McCain believes a policy that leads to asset sales will spur investment. It is not true that all demand curves slope down, but to the extent they do for stocks, a cut in capital gains will lower stock prices. That is a peculiar policy to spur investment.

Unfortunately, as Senator McCain's economic advisors understand (even if he does not), taxing capital gains is not "a case where increasing taxes would decrease the funds available for all the spending government does." Senator McCain accuses Senator Obama's plans of "digging us further into debt," while McCain promises unfunded tax cuts in capital gains (among others). Senator McCain supported the vast majority of the laws President Bush supported; unfortunatley, he appears to also reject the laws that President Bush has rejected so forcefully - the laws of arithmetic.


Anonymous said...

This is the type of stuff that has forced me to leave the Republican party. In the Republican World, you now have to belief a few things or else you're out. One is that any tax cut, not just capital gains, always generates more revenue. This has become doctrine. Rush and Sean say it's so, so it has to be so. If you don't belief it, you're a socialist and your anti-American. No room for doubt on this issue. Moreover, there's no room for debate on foreign policy either. If you have doubts/questions about Iraq, Iran, or kicking the Russians out of the G8, you are anti-American. If you have the least bit of doubt that global warming is a hoax, you're part of the liberal elite whose real is to destroy America. In other words, the new Republican Party requires you to be a total idiot. John McCain has to belief all of this garbage in order to satisfy his "base."

Anonymous said...

The Republican Party is just a bunch of white racists. It is filled with a bunch of Angry White Guys (and Gals) who think the 1965 Hart-Celler Immigration Act ruined America because it made it a lot harder for whites from Ireland, England, France, Germany, Italy, etc. to immigrate to the U.S. and made it a lot easier for the Chinese, Indians, Jamaicans, Mexicans, Egyptians, etc. to immigrate to the U.S. What these racists don't GET is that the 1965 Hart-Celler Immigration Act (Thank You Senator Ted Kennedy) greatly increased Diversity in the U.S. which has made OUR Nation stronger and a much more multicultural place to live. Before 1965 Whites of European descent made up 88% of the U.S. population. Now whites only make up 65% of the U.S. population and by 2042 they will only make up 49% of the population. By 2100 Whites of European descent will only make up about 30% of the U.S. population and also by the year 2100 only 3% of the World Population will be White. The 2008 Election is just a turning point in American History though. By the end of this century white Europeans will be out of power in the United States(FINALLY!) and then we can finally end WHITE PRIVILEDGE and can get REAL Affirmative Action, REAL Reparations, REAL Change, and begin to redistribute wealth and property back to those who deserve it. Unfortunately, these Changes won't take place until the White Kids in Strollers and Elementary School today are in their 60's and 70's. The World is Flat. The white racist Republicans just don't seem to get it!