The House plan for ObamaCare that passed on Saturday contained a plethora of new and increased taxes, which the Americans for Tax Reform listed in an effort to make Americans aware of the burdensome cost of the bill. The Wall Street Journal reports today on one aspect of the new taxes that ATR missed. The Pelosi Plan, if passed by the Senate, would increase capital-gains taxes 69% from their present level, making them higher than any time since the first Clinton term:
House Democrats are funding their new entitlement with a 5.4% surtax on incomes above $500,000 for individuals and above $1 million for joint filers. The surcharge is intended to snag the greatest number of taxpayers to raise some $460.5 billion, and so the House has written it to apply to modified adjusted gross income. That means it includes both capital gains and dividends.
That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today’s capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That’s a 69% increase, overnight. The last time investors were hit with anything comparable was 1986, when the capital gains rate jumped to 28% from 20%, a 40% increase, as part of the Reagan tax reform that lowered income tax rates.
How did that increase work out in 1986? Not so well, as it turns out:
The 1986 experience was not a happy one. Tax revenues from capital gains surged before the increase took effect in 1987, as investors moved to cash in at the lower rate. Revenues then plummeted. Total realized capital gains didn’t again reach their 1985 level of $172 billion until 1996. By 1992, the federal government was barely getting more in revenue ($29 billion) at the 28% rate than it did in 1985 ($26.5 billion) at the 20% rate.
Rate reductions, as in 2003 when Republicans cut the rate to 15% from 20%, have typically had the opposite effect. Treasury receipts from capital gains climbed to an estimated $117.8 billion in 2006 from $49 billion in 2002.
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2 comments:
As the liberals like to say "the debate is over". High Capital Gains Taxes hurt everyone and stifle the economy. Can our leaders really be this stupid?
Do we really need to go down this road a second time to prove it doesn't work. Sh%t we have some stupid elected officials!
When there is clear evidence that raising taxes stifles growth, this administration ignores it. Doesn't matter.
Since the goal is the destruction of the U.S. economy, if a few bucks can be picked up on the way down, so be it.
Higher taxes will only destroy struggling households and more people will be dependent on the government which is precisely their goal.
Wake up people!
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