Does cutting capital gains tax always increase revenue? Well actually NO.

New Republic's The Plank asked economist Jason Furman if that was true:

" Joint Committee on Taxation and Treasury both score raising capital gains taxes as raising revenues. There is some behavioral response but much of that is timing and doesn't affect the medium-to-long term revenue loss.

Note that the experience after the 1997 cut and the 2003 cut is not a meaningful way to assess the impact of capital gains tax cuts on revenues because so many things were happening simultaneously. The JCT score of the capital gains cut in 1997 was a few billion dollars annually. The 2003 cut was something like $5 billion annually. But capital gains revenues can go up or down by tens of billions annually. So it is hard to look at the noisy data and infer ex post the revenue impact of these changes."

In regards to timing, Comments From Left Field added:

"Capital gains accrue when an asset is sold. Except in a few specialized instances, people have a choice about when to sell an asset. If they know the capital gains tax rate will be going down as of a certain date, they are likely to sell assets AFTER that date rather than before it, in order to minimize the tax due. So the increase in revenues experienced once the capital gains tax rate goes down is largely due to the fact that more people are selling assets."



Almost 2 out of 3 households that own stock hold portfolios valued less than $5,000. Plus isn't the point of a 401 k to hold it until retirement?