Graph of the Day for November 25, 2009

Randall Hoven
"Figure 3 shows the maximum capital gains tax rate and capital gains realizations as a percentage of GDP.  The major spikes in realizations correspond to changes in tax rate.  The simple correlation between the two time-series is -0.64, which suggests that realizations increase when the tax rate decreases."

Source: Congressional Research Service report, The Economic Effects of Capital Gains Taxation



Source:  Congressional Research Service report, The Economic Effects of Capital Gains Taxation


Hoven's Index for November 25, 2009


The Congressional Budget Office's error in revenue estimates for 1990-94 from capital gains taxes (the period of high capital gains tax rates):  $737 billion (estimate higher than actual).


Economist Allen Sinai's predictions in 1997 of the marginal effects of a capital gains tax cut if enacted then (and it was):

  • Increase in real GDP annually:  $51 billion.
  • New jobs by end of 2000:  500,000.
  • Increase in real business spending annually:  $18 billion.
Source: US House of Representatives Joint Economic Committee Study, 1997. 


Actual results (total, not just marginal effects of tax cuts) from 1997 to 2000:


Source:  St. Louis Fed (links embedded above).


Graph of the Day Archive.  

"Figure 3 shows the maximum capital gains tax rate and capital gains realizations as a percentage of GDP.  The major spikes in realizations correspond to changes in tax rate.  The simple correlation between the two time-series is -0.64, which suggests that realizations increase when the tax rate decreases."

Source: Congressional Research Service report, The Economic Effects of Capital Gains Taxation



Source:  Congressional Research Service report, The Economic Effects of Capital Gains Taxation


Hoven's Index for November 25, 2009


The Congressional Budget Office's error in revenue estimates for 1990-94 from capital gains taxes (the period of high capital gains tax rates):  $737 billion (estimate higher than actual).


Economist Allen Sinai's predictions in 1997 of the marginal effects of a capital gains tax cut if enacted then (and it was):

  • Increase in real GDP annually:  $51 billion.
  • New jobs by end of 2000:  500,000.
  • Increase in real business spending annually:  $18 billion.
Source: US House of Representatives Joint Economic Committee Study, 1997. 


Actual results (total, not just marginal effects of tax cuts) from 1997 to 2000:


Source:  St. Louis Fed (links embedded above).


Graph of the Day Archive.