ECONOMIC EFFECTS OF THE CAPITAL GAINS TAX.

The discussion in this article presents three aspects of economic effects of capital gains taxation that are of major policy importance. This article addresses the impact of capital gains taxation on economic growth, the impact of capital gains taxation on stabilization of the economy at full employment, and the impact of the tax on efficient use of our economic resources. In discussing the effects of capital gains taxation, the article refers to the differential behavior of the economy under two tax systems — a tax system yielding revenues equal to those collected under the present system but without the preferential features for asset transactions and a tax system such as is actually in effect. The comparison does not refer to the difference between the present tax structure and the same structure with preferential capital gains tax provisions deleted because a closing of all capital gains loopholes would generate different amounts of revenue. The desirability of alternative levels of revenue and their economic effects are issues that need not be discussed in this article.