PrintNovember 25, 2009
Graph of the Day for November 25, 2009
"Figure 3 shows the maximum capital gains tax rate and capital gains realizations as a percentage of GDP. The major spikes in realizations correspond to changes in tax rate. The simple correlation between the two time-series is -0.64, which suggests that realizations increase when the tax rate decreases."
Source: Congressional Research Service report, The Economic Effects of Capital Gains Taxation.
Hoven's Index for November 25, 2009
The Congressional Budget Office's error in revenue estimates for 1990-94 from capital gains taxes (the period of high capital gains tax rates): $737 billion (estimate higher than actual).
Economist Allen Sinai's predictions in 1997 of the marginal effects of a capital gains tax cut if enacted then (and it was):
- Increase in real GDP annually: $51 billion.
- New jobs by end of 2000: 500,000.
- Increase in real business spending annually: $18 billion.
Source: US House of Representatives Joint Economic Committee Study, 1997.
Actual results (total, not just marginal effects of tax cuts) from 1997 to 2000:
- Average annual increase in real GDP (4Q96 to 4Q00): $436 billion.
- New jobs (Dec. 96 to Dec. 00): 11.5 million.
- Average annual increase in real gross private investment (4Q96 to 4Q00): $142 billion.
Source: St. Louis Fed (links embedded above).
Graph of the Day Archive.
