In a must-read New York Times op-ed, long-time financier and former Obama Administration official Steven Rattner calls for raising today’s low capital gains and dividend tax rates to help reduce the deficit, observing:
During my 30 years on Wall Street, taxes on “unearned income” have bounced up and down with regularity, and I’ve never detected any change in the appetite for hard work and accumulating wealth on the part of myself or any of my fellow capitalists.
This echoes the experience of billionaire investor Warren Buffet, who wrote in a New York Times op-ed last year:
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.
As this chart — from our chart book on 10 things you need to know about the capital gains tax — shows, the capital gains rate is the lowest since the Great Depression.
Moreover, the economic evidence is consistent with Rattner’s experience: taxing capital gains more lightly than earned income (wages and salaries) doesn’t boost investment, as our recent report explains.