It is the loophole for narrow special interests that must be eliminated. Until we control those expenditures for the few, we cannot ask for shared sacrifice from the many. CTJ did, however, call for a review of tax entitlements as rigorous as Congress is applying to direct spending programs. The key to estimating revenue effects of capital gains tax changes is determining what, if any, change in taxpayer behavior will result from the tax law change. CTJ s analysis finds that government estimators have significantly overstated the likely taxpayer response and failed to properly account for the retroactice date of the provision.
Capital gains are the profits from the sale of stock, land and other capital assets.
It is widely believed that a lower rate on capital gains results in more sales. This occurs, in theory, because the incentive to sell is greater if the seller can keep more of the proceeds. The volume of the response is, however, disputed. Some believe there is little or no response. On the other hand, some advocates of capital gains tax cuts claim that sales go up so much that cutting the rate actually raises revenue.