Capital gains taxes have a liberal bias!

Capital Gains.

Everyone knows that lowering the capital gains tax is what causes job growth, economic prosperity, freedom, and happiness. After all, it just makes sense: the obvious way to make poor people less poor is to tax rich people less. Liberals want to increase capital gains taxes because they hate success, want to destroy the economy, and like to make angels cry.

How do we know that lowering capital gains taxes help to improve the economy?  Because the leaders of the Free World, Mitt Romney and Paul Ryan, have told us so.  As it was eloquently explained by Reuters, “Romney and Ryan say that lowering tax rates and reducing or eliminating taxes on capital gains and dividends, while letting huge fortunes pass untaxed to heirs, will boost economic growth and mean prosperity for all.”

Romney told CBS News’ “60 Minutes” that his own 14 percent effective income tax rate in 2011 was fair because lower capital gains taxes are “the right way to encourage economic growth.” When Paul Ryan was asked to defend Mitt Romney‘s proposal that capital gains tax be lowered, he said this: “you want to have more capital that goes to more businesses, especially small businesses like this one, so more people can go back to work. That creates economic growth.”

It all makes complete sense, and they keep telling us that it’s true. There is no reason to doubt them.

Except along comes this stupid graph, above, showing that there seems to be absolutely no statistical relationship between capital gains tax and economic growth!

Liberal heathen and communist Len Burman has graphed capital gains rates and economic growth and found no relationship at all, even when looking for lagged influences of up to 5 years!



Obviously, if statistical correlation is contradicting the claims of wholesome upstanding citizens like Mitt Romney and Paul Ryan, then statistical correlation must be suffering from a liberal bias!!!


Graph Data Source: Len Burman Senate Testimony
Graph Found Via: The Washington Post

3 Replies to “Capital gains taxes have a liberal bias!”

  1. To justify the claim that reality has a liberal bias, don’t you have to show that liberals are actually right about something, not just that conservatives are wrong?

    This chart nicely debunks Romney’s economic fantasy, but what about the liberal fantasy that raising the federal capital gains tax rates brings in more federal revenue through capital gains taxes? Raising the rate *must* bring in higher taxes because it’s simple arithmetic, right? Yet see what tax economists have to say.

  2. When you raise capital gains taxes, the immediate reaction is to hold off on selling assets, thus lowering revenue. The opposite, of course, is true. When the capital gains rate drops, people unload assets that they’ve been holding on to to take advantage of the lower rates. What you have to do is look past these fluctuations and see the bigger picture. People will invest and they will take capital gains. What’s the use of investing if you don’t take profits? If we kept capital gains at a steady rate and investors could be sure the rate wouldn’t change, they would sell their assets whenever they needed the money or when they had achieved their profit goals. This income would be taxed at the steady rate and revenue would be produced. Thus the revenue is proportional to the rate – whatever it is.

  3. One more point – of course there are limits to the proportionality. If rates were 100%, no one would bother investing because it wouldn’t generate any income and at a rate of 0%, no revenue would be produced. In theory there will be a rate where the incentive to invest and the revenue will be optimized. No one knows what this rate is, but it’s a goal to shoot for.

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