The 69% Capital Gains Tax Increase

American's For Tax Reform (ATR) has estimated that if they House health care bill is passed, it would raise the capital gains tax by about 69%.

The current capital gains tax rates are 15%. Next year, the Bush tax cuts will expire and the capital gains tax will go back up to 20% and then RAISED (hmmm raising tax on people earning less then 250k per year, who'd have thought) to 25.4%. That is a 69% increase.

Now this sounds good to raise this kind of a tax to create income, but how did this work out in the 80s?

The 1986 experience was not a happy one. Tax revenues from capital gains surged before the increase took effect in 1987, as investors moved to cash in at the lower rate. Revenues then plummeted. Total realized capital gains didn’t again reach their 1985 level of $172 billion until 1996. By 1992, the federal government was barely getting more in revenue ($29 billion) at the 28% rate than it did in 1985 ($26.5 billion) at the 20% rate.

Rate reductions, as in 2003 when Republicans cut the rate to 15% from 20%, have typically had the opposite effect. Treasury receipts from capital gains climbed to an estimated $117.8 billion in 2006 from $49 billion in 2002.