Tuesday, January 27, 2009

My stimulus idea

While the President and Congress bicker over how much to spend and which taxes should be cut to stimulate the economy, here is one idea they are totally ignoring:


A cut in the capital gains tax automatically increases the value of any future corporate earnings and, therefore, will increase the stock price of any company expected to make profits in the future. This country has lost at least $20 trillion of paper wealth and this will help recover some of it. Spending money and going into debt isn't going to make us wealthier. But cutting the capital gains tax will.

But what about all that lost revenue to the government? First, I love it when the government collects less revenue. But more important, with the huge losses in the stock market, I am sure the government will be collecting little to nothing from the capital gains tax. So the cost to the government is very low.

Will this single handedly solve the economic problem? Definitely not. Will it help? Probably. But very important, even it has no economic benefit, the cost of eliminating the capital gains tax is very low.

A side benefit, taxpayers save millions of hours no longer having to fill out Schedule D.