The biggest loophole of all, though, is capital gains. There are a number of economic arguments used to justify a lower capital gains tax rate, particularly the belief that it boosts savings, investment, and economic growth. Problem is, the economic studies are ambiguous at best. Louis Johnston, economist at College of Saint Benedict/St. John’s University, notes that when capital gains taxes were cut in 1998 and in 2003, savings rates did not pick up and the GDP growth rate declined. “Nobody has been able to show any relationship across countries and within countries over time between capital gains taxes and economic growth,” says Joel Slemrod, economist at the Stephen M. Ross School of Business at the University of Michigan. “It’s one of a million things that affect economic growth, and if it were huge, we’d be able to pick it up out of the data.”

Chris Farrell, BusinessWeek

(Visited 77 times, 1 visits today)