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there is no evidence from the actual historical data demonstrating that capital gains tax rate reduction would reduce revenues
[[Image:Cap gains tax.gif|right|''Source: US Gov't'']]
[[Image:Cap gains tax.gif|right|''Source: US Gov't'']]
Others have predicted that reducing the capital gains tax rate can actually increase the amount of revenue the tax generates (see [[Laffer curve]]). People tend to hold on to stocks or other investments when selling them causes their profit to be reduced too much by taxation. So, increasing the tax rate paradoxically reduces the amount of tax revenue. This is like when a store raises its prices, only to find that sales diminish. The idea is to increase the sales price to increase profit, but without passing the point of [[diminishing returns]].
Others have predicted that reducing the capital gains tax rate can actually increase the amount of revenue the tax generates (see [[Laffer curve]]). People tend to hold on to stocks or other investments when selling them causes their profit to be reduced too much by taxation. So, increasing the tax rate paradoxically reduces the amount of tax revenue. This is like when a store raises its prices, only to find that sales diminish. The idea is to increase the sales price to increase profit, but without passing the point of [[diminishing returns]].
Economist Christopher Frenze wrote:
*Three main conclusions follow from the data. First, capital gains realizations and revenues are highly responsive to changes in the tax rate. When this sensitivity is ignored or understated by official revenue analysis, huge errors have resulted, as in the previous capital gains debate. Second, there is no evidence from the actual historical data demonstrating that capital gains tax rate reduction would reduce revenues. Third, on the basis of the historical data on capital gains realizations and revenues, it would be reasonable to expect higher revenues to follow a reduction of the capital gains tax rate. [http://www.house.gov/jec/fiscal/tx-grwth/process/process.htm#endnotes]
[[category:Taxation]]
[[category:Taxation]]