You Couldn't Tell It

clipped from meganmcardle.theatlantic.com Optimal tax theory pretty much hates capital gains taxes because they, as their very name suggests, impede capital formation. Also, capital is much more mobile than labor, which is why countries like Sweden focus their taxation on incomes. In fact, when I look at the graph he posts, it seems to tell me a very different story than it is telling him. By 2007, capital gains revenues had nearly returned to their 2000 highs in real dollars, even though the indexes hadn't regained their previous (real and/or nominal) heights. When you consider that the capital gains revenues in 2000 were coming off nearly 20 years of uninterrupted growth, this in fact suggests that the capital gains tax raised revenues. Moreover, the inflection point is at the time of the cut to 15%, with revenues marching steadily upward thereafter. Now, I'd be the last person to suggest that correlation is causation--I'm only pointing out that if they didn't raise revenues, you couldn't prove it by this graph.