Mark Bloomfield heads the American Council for Capital Formation, a business advocacy and economic policy think tank dedicated to public policies that encourage saving and investment and promote long-term economic growth. He also writes a blog (mrcapitalgains.com) that advocates lower taxes on saving and investment.
Why should people care about the capital gains tax in the current economic environment?
The first reason is that the middle class in America has lost its retirement nest egg. Reduce the tax on capital gains, and the value of those nest eggs will go up and confidence in retirement security will be boosted. The second is economic growth in the short and long term. To get some immediate economic stimulus, let’s encourage investors to move the large amounts of money now sitting on the sidelines back into the stock market and also into business opportunities. For the U.S. economy to prosper in the longer term, we have to address the historic low levels of U.S. savings and investment.
The bailout package was widely criticized for its lack of detail. What specific legislative action would you suggest to get the economy moving?
One out-of-the-box approach is a different type of capital gains tax cut whereby investments made within the next 12 months would be eligible for a capital gains tax cut whenever the profit is realized. This approach would be a good shot in the arm to get the economy moving. Stock prices would increase as soon as it became law.
What are the chances of that happening?
It is not on the radar screen now; it should be.
What is on the radar screen?
During the campaign, Obama supported lowering capital gains tax on investment in small business. But unfortunately that has disappeared; it’s not in the stimulus package.
What’s the biggest challenge in passing capital gains tax reform?
Unfortunately, many people wrongly assume that capital gains tax cuts are a boon for wealthy individuals and corporations. It’s the middle class who will be the beneficiaries. If this were all about making the fat cats fatter, I’d switch sides.
