So, uh, when did Charlie Gibson turn into a supply-side nut job?

Let's get rid of the Corporate tax first...

Then tax all income transfers (wages, interest, dividends, inheritance, capital gains, etc.) at about 20% with an nice big personal exemption for yourself, your kids, a portion of your mortgage interest and your charitable giving.

You don't know of any SERIOUS economist who agrees that cutting capital gains increases revenue? Not one? I guess you use the word serious to mean 'agrees with me and my friends', and everyone else as 'stupid'.

I did 5 minutes of internet research and found an economist that, unlike you, actually has a Phd in economics from a university that even you would refer to as 'elitist'. He fully supports Gibsons assertions. I'm willing to bet your small paycheck I could find others...

Heck, I'm just one of these corn fed simpletons here in the flyover zone in the midwest but even I can read a graph where 2 events are followed by upward trending lines. I could even describe the reality-based logic that blows your tortured argument out of the water buy why bother? I'm just 'stupid'.

The fact that you take such an important sophisticated topic and take such a pejorative position means that, well, you're not making it as an economic reporter either. If I were you I'd demand a refund on your undergraduate public affairs degree. Shameful. Oh Wait, this is Time Magazine, the ones who disparage our heroes of Iwo Jima their cover. What's Time's revenue growth graph look like? Maybe your proudct is lousy? Everyone I know already thinks so...

Common Sense,

Woah there killer, no need to get that upset about it.

To phrase your argument in less angry terms:
There are quite a few economists who would argue that reducing taxes increases growth and with increased growth comes increased revenue. That's how tax cuts are supposed to increase revenues.

An economist named Arthur Laffer is relatively famous for creating a bell-shaped curve that shows the relationship between increases and decreases in tax revenue vs. tax rates. At one end you've got no revenues because taxes are so high no one can/will pay them. At the other end you've got no revenue because taxes don't exist. Somewhere between those two extremes is a happy medium where people can afford to pay their taxes and the government collects enough revenue to run itself.

The problem with the Laffer curve is, absolutely NO ONE knows where we are on it at any given point in time. Lots of very smart people study this stuff and come up with elaborate theories and justifications, but its still nothing more than an educated guess.

As far as the chart goes, it really covers a way to short (and economically volatile) period of time to give an accurate picture of whether or not capital gains tax cuts influence the economy at all.

For example, before the 1997 rate cut, revenues were already going up and had been since the early '90s because of the massive growth of the economy due to information-age technology advances. Revenues start going down in 2000 not because of any capital gains tax increase (there wasn't one) but because of the tech bubble popping.

In 2003 a capital gains tax cut is passed, but much more importantly, the Federal Funds Rate is dropped to almost 0. The Fed dropping rates so precipitously had a lot more to do with the economy taking off again than any capital gains tax cut could have because the Fed rate cuts freed up a truly staggering amount of capital throughout the entire economy, whereas the capital gains tax cut only really affected investors with significant holdings.

The graph doesn't really prove anyone's argument one way or the other, the sample size is small for a historical market comparison, and the time frame in question is unusually volatile.

Hope that helps.

Common Sense: Well, it'd be nice to do a more comprehensive survey than the 5 minutes, just to find out the proportions, and to verify whether it is "approximately" none. As I recall from my grad school days, if the capital gains tax cut is perceived as temporary, then the cut merely changes the timing of tax receipts, moving ahead sales of assets forward. A permanent capital gains tax cut -- if such a thing can be credibly committed to -- might increase or decrease revenues, depending upon parameter values and other assumptions.

For what it's worth, the CBO proceeds asserts that raising the capital gains tax rate raises revenue; see here. Their analysis is based upon a number of conventional dynamic and static models.

If you want to make a case for a reduction in the capital gains tax rate, I'd do it on the basis of whether the cut accelerates capital accumulation, and by how much (weighed against what happens to interest rates that feed into the cost of capital).

A myth that is often peddled is that 50% of Americans own stock so 50% would be hurt by a capital gains tax, right? Wrong. Only 30% of Americans own stock that is actually subject to taxation (things like 401k's don't count). So Gibsons's line of questioning is fundamentally dishonest, or else he is REALLY uninformed, take your pick.

That pretty much sums up the ABC coverage of the debate; misleading or stupid, take your pick.

Very interesting and informative comments after my rant filled response to the originally written high school paper on capital gains.

I guess the issue that set me off was the simplified treating of this topic by Chaz or Justin or whomever he is. This combined with the political herd mentality that so encompasses rags like Time and it was too much to take. I think the discussions post high school paper could be great 'grist for the mill' for a real science-based dive into this topic i.e. weighing the arguments and understanding that incentives for investment take time for the return to materialize, etc.. The problem is that the original typesetter, in my opinion, doesn't care about these matters--his immature opinions indicate he's more interested in propagating a political view. Can you believe that Chaz mentioned a politician talking about taxing people as just "fairness 'n stuff"? What kind of society blindly tolerates someone else to determine what's 'fair' with regard to who takes what from whom? Again, being a dummy, I thought the best goal of taxation was to fund the critical funtions of government--NOT redistribute wealth according to how the king views the world. Big difference: one sees government revenue as needed for infrastructure, safety net, defense etc. and the other sees government as a vehicle to exploit social envy and as such compromises the very freedom that made this nation great. I tell my European friends this all the time: I love America! It's OK to be proud of what America has done! It's not jingoistic, look at the numbers!

I was also trying to point out the irony of Chaz and his business behaving like this in a still somewhat free market and that their continued actions have in large part drove their business into the ground. Too bad they can't reflect and take the time to draft a compelling interesting piece--there's a market need for it and maybe it would help their revenue? After all, I bet Time restricts the length of their articles like this (probably have to limit the number of words due to the market researched duration of 'one sitting' in the throne room) butt still a better crafted piece with input like that from above would help inform their readership and actually give them some value.

Talking about supply-side nut jobs, we've got one running for president: McCain has insisted any number of times in the last year or so that lowering taxes increases revenue. (Pre-2000 he had been a supply sider, a position he explicitly renounced in a 2000 TNR interview saying he was previously uninformed on the issue. Not sure exactly when he switched back again.)

I believe in supply side economics. I voted for Regan, because he said, if you make the rich, richer, then you can share in the trickle down effect. That was in 1980 and I am still waiting for my trickle down portion. Maybe, Regan made a small miscalculation. Instead of money trickling down, perhaps it really trickles up.

mpizzle: why don't 401K's 'count'? I own a mutual fund that owns a stock, so don't I own that stock? Aren't 401K's another way to spur long term investment, you know, like a capital gains tax reduction? So, your 'truth' says that only 30% of Americans own stock so this is some big black helicopter conspiracy being peddled? Gibson said 100 million people own stock... the US population is roughly 300+ million, so how many people would 30% of themthar folks be?

Please spare the 'if you don't agree with me your'e stupid or a nut job' arguments and find me ONE society that's taxed themselves into prosperity... You know, like the old Soviet Union... Socialism doesn't work regardless how appealing the marketing is. Prosperity comes from economic growth via innovation mostly in the private sector--we all owe those rugged individuals our thanks.

Amalek: did you really vote for Regan? What's the growth in income, GDP, in the 80's? How about household income, especially when we got rid of that Jimmy Carter Soviet 70% marginal tax rate? This country PROSPERED immensly then and I'm sorry that you were unable to sieze the opportunity. I guess we're supposed to hand you some pie now eh?

"Common sense", did you read what mpizzle wrote? 401K's don't count (for this purpose), because 401K's aren't subject to the capital gains tax.

The $152 economic stimulus act that will be giving money to 90 percent of the taxpayers who are at the lower end of the tax scale shows most politicians believe in trickle up economics. The key to making the economy grow is putting extra cash in the hands of the spenders...plain and simple.

Correction from Conman- In my previous post I meant to say the "$152 billion economic stimulus act"...sorry

I am for abolishing all taxes, except one. A limit of $50,000.00 ($100,000.00 per couple) should pay 98% taxes on all gains over the limit. Of course, that much extra money in the hands of so many poor people would probably overheat the economy. We may have to import train loads of Mexicans to fill all the jobs, that would create. But I am willing to learn to speak Spanish to increase my standard of living.