I wish the Wall Street Journal wouldn’t publish things like a column arguing that the late 1990s surpluses stemmed from the capital gains tax cuts. It’s just not true, for reasons that Bruce Bartlett ably outlines: the increased revenues from the capital gains tax just aren’t great enough to account for the majority of the boost. You might posit some sort of supply-side effect, but it would have to be implausibly large to generate the lion’s share of the surplus, plus some of the increase in capital gains revenue–perhaps all of it–was due not to cutting the tax rate, but to secular changes in the the equity markets.
I think that in a country with a low savings rate and a stiff corporate
income tax, a low capital gains rate is a good idea. But this is a
position that can easily be supported with facts; it does not need a
lot of rubbish lies about raising tax revenues by lowering the tax
rate. There are at best very few tax rates in the United States high
enough to generate the kind of deadweight loss (and widespread evasion)
that would allow us to generate higher revenues with lower rates; and
none of those arguable cases are significant sources of federal
revenue. If Republicans want to be taken seriously when they complain
about the ridiculous things Democrats say in support of their policies,
they need to stop generating ridiculously lies of their own about the
benefits of tax cuts . . . which may be legion, but do not include
greater tax revenue for the government in any measurable time frame.
