No Public Gains from Capital Gains Tax Cuts

Conservatives, and some in the media, say that a cut in capital gains taxes will stimulate economic growth enough to actually increase government revenue. But, as the Center for Budget and Policy Priorities notes, both the Congressional Budget Office and the Treasury Department have estimated that the government would lose money in the long run if the capital gains tax cuts enacted in 2003 were made permanent—$100 billion, according to the CBO. As for the economic growth effects, consider this: A study by Federal Reserve economists found that European stocks, which did not benefit from the U.S. capital gains tax cut, performed as well as stocks in the U.S. market in the period following the tax cut. Rather than pursuing the myth that tax cuts provide a free lunch, we need sensible tax policies that will allow us to pay for urgent notional priorities.