The Post Gets It Wrong
First off, there is only one "tax cut" in the proposal, not two. The one in the proposal in the Senate they refer to is making permanent the extention of the capital gains cut. The other tax cut they refer to as "being for the wealthy" is a increase in the amount that can be put into Roth IRA's.
They get it wrong because they insist on using static numbers for calculating the cost of the tax, even though the last 10 years has proven that theory wrong twice (1997 and 2001). When Congress pushed through the 1997 cut, liberals claimed it would wreck the economy, and cause huge deficits. Then we ran a surplus for the next 3 years until the 2000 recession.
When the rate was cut from 28% to 20% in 1997 the income from capital gains went UP from $69 billion in 1996 to $79 billion in 1997, and to over 109 billion in 1999! A large amount of that growth came from venture capital investment, which exploded when it became "tax friendlier" to be in that business.
A 48% rise in capital gains income to the government was also seen from 1981-1983 when the rate was cut from 28-20%. Revenue from the tax grew much more modestly from 1983 to1997 when it was raised again.
The biggest misconception is that the money does nothing if it doesn't go to Congress to spend. In 1996 2004 businesses received venture capital funding, nearly 6000 received it in 2000.
Would those 4000 more businesses per year received the same amount of funding in those years? Probably not, since the number had been flat since the early 1990's. How many people were employed in those start ups who then paid income taxes, social security and medicare taxes and state taxes on the money that was spent?
The second misconception is that Roth IRA's, where taxes are paid now on deposits, but not on withdraws in the future are "for the rich". I'd say that if you make under $70k per year, have a mortgage, and a couple of kids, a Roth is probably a better choice than a traditional IRA. (I'm not a tax advisor, consult a professional).
I say this because the deductions for mortgage interest, child tax credits, and dependents will probably lower your tax bracket enough that the traditional IRA isn't a huge help. And, when retirement comes around, you keep more of your money, when you'll probably need it more.
Even if Roth's were only for the rich, a Roth isn't the equivelant of putting money in a mattress. It's invested by whoever is managing the acccount, meaning more investment by an individual has implications for more than just them. It ends up in the markets, fund more businesses, and generating more capital.
The Post's article goes straight to the heart of the liberal misconception that Government knows best how to use our money. However, by ignoring the history of the capital gains cuts, it ignores the truth, that investors have done more for us with that cash than the government.
A lot of information in here came from "A Capital Gains Tax Cut: The Key to Economic Recovery" I suggest that liberals who believe government to be the best stewards of our money not read this, it will ruin your day.
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