Yesterday, 2012 GOP presidential long-shot Jon Huntsman unveiled an economic plan that, in addition to including standard conservative tropes about repealing the Affordable Care Act and the Dodd-Frank financial reform law, would eliminate the capital gains tax entirely. This proposal came just a week after Huntsman hinted that he may be open to raising the capital gains tax, which currently stands at 15 percent.
But Huntsman is far from alone in the GOP primary in proposing full elimination of the capital gains tax. In fact, five GOP presidential candidates have proposed the very same thing:
At least five Republican presidential candidates support eliminating taxes on capital gains, proposing even deeper cuts than former President George W. Bush endorsed and standing in contrast to advocates of higher investment tax rates such as Warren Buffett.
According to published reports or their websites, Minnesota Congresswoman Michele Bachmann, Texas Congressman Ron Paul, former pizza executive Herman Cain and former House Speaker Newt Gingrich have said they back getting rid of the capital gains tax, which now has a top rate of 15 percent for most assets held for more than a year.
Republicans have proven time and again that they really love tax cuts for the wealthy, but completely eliminating the capital gains tax is nothing but a pure handout to the ultra-rich. At the moment, the richest 0.1 percent of Americans pay 44 percent of the capital gains tax, and 68.3 percent of the tax is paid by the richest 1 percent. The bottom 95 percent of Americans pay just 10 percent of capitals gains taxes.
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But the tax still brings in a substantial amount of revenue. Complete repeal, using data from the Congressional Budget Office, would cost about $1 trillion over 10 years. [See methodology below.]
As billionaire investor Warren Buffett wrote in an op-ed, “I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off.” Indeed, the conservative claim that lower capital gains rates leads to increased investment and job creations doesn’t hold up to scrutiny. Perhaps that’s why conservative icon Ronald Reagan actually equalized the capital gains rate with the regular income rate, a fact that conservatives tend to forget.
Methodology: Projected capital gains receipts on a current policy baseline (which assumes that the Bush tax cuts expire and the tax goes from 15 percent to 20 percent) from the Congressional Budget Office are included in Table 4-3 here. The change in revenue from extending the 15 percent rate until 2021 is in Table Revenues—Option A-1 here. To calculate the cost of full repeal, we assumed that the 15 percent rate would be extended for 10 years.