Policy Watch: Cutting Capital Gains Taxes

Auten, Gerald E.; Cordes, Joseph J.

doi:10.1257/jep.5.1.181

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Journal of Economic Perspectives: Vol. 5 No. 1 (Winter 1991)

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Policy Watch: Cutting Capital Gains Taxes

Article Citation

Auten, Gerald E., and Joseph J. Cordes. 1991. "Policy Watch: Cutting Capital Gains Taxes." Journal of Economic Perspectives, 5(1): 181-192.

DOI: 10.1257/jep.5.1.181

Abstract

From 1922 to 1986, long-term capital gains were taxed at lower rates than other income, generally by allowing a portion of long-term capital gains to be excluded from taxable income. While taxing capital gains at the same rates as other income has been hailed by some as a major accomplishment of tax reform, it has been criticized by others as one of its main flaws. As a result, there have been proposals each year since 1986 to restore some type of capital gains preference. These proposals have sparked a lively debate centered on three main questions: Would reducing the capital gains tax lower or raise federal revenues? Who benefits most from cutting the capital gains tax? Would lower tax rates on capital gains improve economic performance?

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Authors

Auten, Gerald E. (US Dept of the Treasury and Bowling State U)
Cordes, Joseph J. (Congressional Budget Office and George Washington U)

JEL Classifications

H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes

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