The Public Policy / The Capital Gains Mandate
Bush, Jeb
THE PUBLIC POLICY THE CAPITAL GAINS MANDATE N o, it wasn't Willie Horton or the Pledge of Allegiance—the issue that took the prize for sheer demagoguery in last year's presidential campaign was,...
...Close to 20 million jobs have been created since 1981...
...This objective outweighs the admirable objective of consistency in the tax code...
...As we compete against Japan, which has a low capital gains tax, and West Germany and other European nations, which have no capital gains tax, let's not go into the fight with one hand tied behind our backs...
...The strong support of the President and Secretary of Housing and Urban Development Jack Kemp for enterprise zones stems from one simple fact—government programs alone cannot do the job...
...With what result...
...And by Jeb Bush for simplicity, why do all the accountants I know walk around with constant smiles on their faces...
...The result is reduced investment and economic activity...
...ritics of the Bush Administration's %.../ tax cut initiative have attacked it on three fronts...
...And the candidate who led the charge in misrepresenting what the issue was all about was Governor Michael Dukakis, who, with class-warfare rhetoric, argued that a cut in the tax would be a "$40 billion giveaway for all of Bush's rich friends...
...It's time we relearned the economic lessons of history...
...Let liberal opponents of the cuts argue against that...
...Again, check the record: columnist Warren Brookes recently cited Treasury figures to demonstrate that since passage of the Steiger Amendment, increasing amounts in capital gains have been declared—and more taxes paid—even though the rates were lower...
...On two of those occasions, economic growth and opportunity were the winners...
...The critics' second argument is, once again, the old class-warfare appeal...
...Like candidate Dukakis, they charge that the cut would be "another giveaway for the rich...
...In 1978, the Steiger Amendment helped stimulate free enterprise-driven high growth in areas like the Silicon Valley Again, in 1981, a second supply-side cut brought the top marginal rate down to 20 percent on capital gains...
...Proving...
...THE PUBLIC POLICY THE CAPITAL GAINS MANDATE N o, it wasn't Willie Horton or the Pledge of Allegiance—the issue that took the prize for sheer demagoguery in last year's presidential campaign was, of all things, the capital gains tax rate...
...Yet, even after the stunning success of these pro-growth tax rate cuts, the liberals in Congress actually argued against success by doing away with the capital gains differential in 1986...
...In order to compete in a very competitive world, we need to stimulate savings and investment over consumption and debt...
...Fact: the most recent cut in capital gains resulted in the richest one percent of Americans paying a significantly higher share of the total tax burden...
...32 THE AMERICAN SPECTATOR JUNE 1989...
...No, the primary beneficiary of the Bush plan isn't "the rich" the liberal demagogues love to flog but entrepreneurs of all classes who are given incentive to risk their capital—and create jobs—by a capital gains-tax differential...
...Indeed, according to Treasury Department estimates, the Bush capital gains cut would yield more than $5 billion in higher revenues by the end of 1990, while at the same time creating thousands of new jobs...
...Well, the election is a thing of memory now and President Bush, carrying out his campaign pledge, has called for lowering the tax bite on capital gains from a destructively high 33 percent rate to 15 percent...
...Such reduction, combined with the other aspects of zone legislation—property tax deferrals, sales and employment tax abatements—provides entrepreneurs incentives for investment, offering hope of bringing these areas into the nation's economic mainstream and helping disadvantaged members of minority groups realize the American dream...
...If there's any lesson we should have learned during the past thirty years, it is that only an active private sector can turn the South Bronx, East Los Angeles, and Miami's Overtown into economically viable areas...
...the early 1980s was enhanced by supply-side cuts...
...heck the record: on three occasions in the past ten years, Congress has changed the effective tax rate on capital gains...
...It's about competition...
...Thus, despite the sour-grape arguments of the Democratic opposition, it's clear that the economic activity of Jeb Bush is a businessman in Miami, Florida...
...The outcome of the debate on this issue—with the administration on one side and the congressional Democratic leadership on the other—will help determine the question of whether the United States is really serious about being competitive in the global economy...
...In the final analysis, the capital gains issue is about more than just taxes and budgets...
...Reduction of the capital gains tax will also help accomplish a key Bush Administration priority: rebuilding our inner cities through enterprise zones...
...The bottom line, it seems to me, is that all the energy currently being expended in expressing concern overleveraged buyouts could better be spent by creating incentives via the capital gains differential, in order to create equity rather than pile up debt...
...That year, in order to achieve a comprehensive tax package, the Reagan Administration acquiesced and the rate was in effect increased to as much as 33 percent...
...When the capital gains rate was increased, fewer gains were declared and the Treasury took in less revenue...
...That people obviously have less propensity to sell homes, stocks, businesses, or other assets if the tax on sales is too high...
...Third, critics led by House Ways and Means Committee Chairman Rostenkowski are opposed to the capital gains tax reduction because it is too soon to tinker with so-called 1986 tax simplification legislation...
...How can we expect to maintain our competitive position—much less pre-eminence—in the world marketplace if America's productive capacities are burdened at every turn...
...First, they cite the budget deficit—ignoring the economic fact that (contrary to their predictions) previous capital gains cuts have resulted in increased revenue...
Vol. 22 • June 1989 • No. 6
