Peter Ferrara takes us on a tour of capital gains tax rate changes:

over the past 40 years, every time capital gains tax rates have been cut, revenues have increased, and every time capital gains tax rates have been increased, revenues have declined.

In 1968, a 25% capital gains tax rate generated real capital gains tax revenues of $40.6 billion calculated in 2000 dollars. The capital gains tax rate was then raised 4 times in the next 7 years to 35%. By 1975, at the higher rate, capital gains revenues totaled $19.6 billion in constant 2000 dollars, less than half as much.

In 1978, the capital gains tax rate of 35% yielded $29.9 billion in 2000 dollars. The rate was then cut 3 times to 20% over the next 4 years. By 1986, the new rate, 43% lower than the 1978 rate, raised $92.9 billion in 2000 dollars, about three times as much.

The capital gains rate was raised by 40% the next year, to 28%. Capital gains revenues fell to $56.2 billion that year, and declined all the way to $34.6 billion by 1991.

In 1997, Congress cut the capital gains tax rate from 28% back down to 20%. Despite this almost 30% cut in the rate, capital gains revenues rose from $62 billion in 1996 to $109 billion in 1999. Revenues over the period 1997 to 2000 increased by 84% over the projections before the tax cut.

Finally, Congress cut the capital gains rate from 20% to 15% in 2003. Capital gains revenues doubled from 2003 to 2005, despite this 25% cut in the rate. Revenues increased by $133 billion

So what’s the conclusion? Perhaps that we should raise the capital gains rate, even though that would create economic disincentives and bring in less tax revenue — after all, it’s about fairness.

This entry was posted on Thursday, February 11th, 2010 at 4:57 am and is filed under business, Democrats, General, Republicans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.