The macroeconomics effects of a capital gains tax reduction would be minimal unless the saving rate increases to provide additional resources for investment. It is argued that the saving rate is unlikely to increase as a consequence of a capital gains tax reduction since empirical studies have found only a weak relationship between saving rates and rates of return.
There is more to macroeconomic cause-and-effect that saving to ensure a successful economic catalyst. It is more important that investors choose the right asset allocation to ensure they receive maximum rates of return and with the tax cut, they will be to enjoy that realized gain and not only re-invest it into the markets, but form an increase in consumer spending. warming up the macroeconomic climate.
What Has Happened
As a result of excellent fiscal policy, the top tax rate on net capital was dropped from 20% to 15%, and likewise for tax brackets of 15%, the new rate is 10%, and for 10%, the new rate is 5%.
The Next Step
A simple 5% in the top tax rate is not enough for the American economy to feel the full effect of the Capital Gains tax cut. It is important for you to contact your Senator and Representative to express how you feel about eliminating the Capital Gains tax at a personal level, altogether. As an investor, you are contributing to economic stimulation, and the tax only serves to hinder that.
Saxton, Jim. “The Economic Effects of Capital Gains Taxation.” Joint Economic Committee Study, June 1997. [http://www.house.gov/jec/fiscal/tx- grwth/capgain/capgain.htm]
Moore, Stephen and Silvia, John. “The ABCs of the Capital Gains Tax.” Policy Analysis, October 1995. [http.www.cato.org/pubs/pas/pa-242.html]
Wellesley, Donald. "Taxing Corporate Capital Gains". Editorial, April 2004. [http://www.nber.org/digest/apr04/w10153.html]