Capital Gains Tax Issue in the U.S.

The nation's media generally and the Bush Administration more specifically have attempted to protray the controversy over the capitalgains tax as a liberal/conservative clash. Such a depiction suits the Administration, because, as was true of the Reagan Administration which preceded it, it hopes to make points with the public by avoiding a discussion of hard facts, and, instead, deal with the issue on an emotional level where it can blame all of the nation's troubles on evil liberals and socialists. That intellectual giant and stalwart defender of the conservative cause, Representative Bob Dornan (1990), R. Cal., has been kicking the dead socialist horse as hard as he can on the capitalgains tax issue, in defending the Administration's position on the floor of the house.

In point of fact, agruments on the capitalgains tax issue cut across liberal/conservative lines, to a point where an

attempt to assess the issue strictly in terms of American liberal and conservative pol

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is that, over the longterm, federal governmental revenues losses stemming from such a reduction will increase the federal budget deficit, thereby harming the overall economy (Stenholm, 1990). Each of these arguments has a sound basis in economic theory. 4 ASSESSMENT OF THE SELECTED PRO AND CON ARGUMENTS Each of the four arguments identified in the preceding section is assessed in this section. The arguments are assessed separately. Eliminating the Tax on Inflation: Pro This argument favoring a reduction in the tax rate for capitalgains holds that much of what is currently taxed as capitalgains, in fact, represents nothing more than changes in nominal values of assets resulting from inflation in the general economy (Archer, 1990). Even The New York Times (1989), which editorially opposes a tax cut for capitalgains, acknowledges the validity of this argument, and supports such indexation for future investments in corporate equity. A strong defense of this argument is that indexing capitalgains for inflation not only reduces or eliminates an inequitable tax penalty, but that it would also stimulate investment. This argument is sound, because the beneficiaries of such indexation would not be investors in the stock m
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Approximate Word count = 1638
Approximate Pages = 7 (250 words per page)

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