> From: Gil Skillman <[EMAIL PROTECTED]>
> Subject: [PEN-L:11530] Info request re new tax accord
> 2) Is there a segment of such investment--e.g. "venture capital"--that is
> particularly dependent on private purchases of financial instruments? How
> much so?
American Enterprise Institute put out a little book on venture
capital. It was mostly oriented to attacking proposals for the
Federal government to undertake industrial policy interventions
into private investment. About one percent of business start-ups
owe their financing to "venture capital," strictly speaking. Most
of the financing comes from corporations, rich folks who take a
fancy to an idea, and personal/family sources (e.g., credit cards).
Venture capital funds per se are a very minor player.
> 3) What percentage of realized capital gains come from assets which do not
> represent new investments in productive capacity, e.g. previously issued equity?
Depends on how new is new. I would speculate that most
gains derive from speculative activity or assets which have
been held a while, so little of it has to do with 'new'
investments. This isn't a very good argument, however,
since the inducement of a preferred cap gains rate is
held to stimulate the new investment. Tax economists
don't buy that. Surveys of tax professionals (economists,
accountants, attorneys working for academia, govt, and
business) show strong majorities favoring the same rates
for capital gains as for other types of income.
> 4) Is there any significant (new) evidence on the beneficial economic
> effects of cutting the capital gains tax? Paul Craig Roberts seems to think
> there is, but, well, consider the source.
Nope. This 'source' doesn't even do tax research, let alone
any credible research. Don't forget a CG cut obliges some
additional Federal borrowing, so the 'price effect' (e.g.,
the higher after-tax rate of return) has to be juicy enough to
overcome whatever marginal propensity to consume out of
the tax cut exists. As you know, it's not even clear that
higher ROR's induce more saving, rather than less.
Citizens for Tax Justice has a distributional table on the
impact of the capital gains cut on their web site
(www.ctj.org). On average the bottom 95 percent
of the population gets at most $115 tax savings per
tax filing unit annually from the cut, whereas the top
one percent get more than $6,000. Another effective
argument is the contrast horizontally. Think of grandma
and her interest-bearing CD or savings account getting
socked every year with the full income tax rates, while
somebody else with an equal amount of capital gains
income enjoys multiple preferences: the lower rates,
deferral of the tax liability, the elimination of liability
for assets held until death, and now reduced estate
taxation of the latter.
Rather than writing your Member of Congress, I would
suggest you write an op-ed or letter to the editor and
send a copy to the Rep.
We can help you with placing such an item. This goes
for the rest of you blokes too. Let me know if you're
interested in further assistance or have further
questions.
Cheers,
Max
"People say I'm arrogant, but I know better."
-- John Sununu
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Max B. Sawicky Economic Policy Institute
[EMAIL PROTECTED] 1660 L Street, NW
202-775-8810 (voice) Ste. 1200
202-775-0819 (fax) Washington, DC 20036
http://epn.org/sawicky
Opinions above do not necessarily reflect the views
of anyone associated with the Economic Policy
Institute other than this writer.
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