Obama vs. Laffer September 15, 2016Posted by geoff in News.
The CBO recently released a report entitled: The Distribution of Asset Holdings and Capital Gains, which talked about the demographics of wealth and non-wage income. But I thought the report was interesting in the way it unintentionally supported the old Laffer Curve, which says that increasing tax rates can result in diminished revenues.
Here’s a plot of the long-term capital gains tax rate (x-axis) vs. the tax revenues the US government received on capital gains (1977 – 2013). As you can see from the chart below, there seems to be a definite trend towards lower revenues as the tax rate is increased. If you ignore the recessions the trend is even more pronounced.
In 2013 President Obama raised the capital gains tax rate from 15% to 20% (plus a 3.8% tax on incomes over $200K to help fund Obamacare). He is proposing raising the tax to 28% on married incomes over $500K (don’t know why he singled out married people). I submit that his strategy is ill-founded, substituting moral satisfaction for economic sense.
And Hillary! will be at least as bad.