Dreier on Capital Gains

Re “Cut the Capital-Gains Tax to Get Money Flowing and Create Jobs,” Commentary, March 25:

The pleaders for big money and the corporate bottom line never give up. Despite the total failure of Ronald Reagan’s biggest tax cut in history to accomplish what he promised, and George Bush’s defeated assurances that capital-gains tax reductions would end the recession, here now comes David Dreier (R-Covina), repeating the same old tired arguments and proven fallacies: A capital-gains tax cut will increase investment and economic growth; it will pair new factories with our pool of unemployed skilled workers; and it will increase workers’ wages along with state and local government revenues.

Would that it were so, but what happened when Reagan, with similar promises, dramatically cut taxes on very high incomes and took “government off the backs of business”? The facts are well established. Multibillion-dollar savings and loan and bank failures that the rest of us paid for. The number of billionaires trebled, the biggest wealth concentration in history; real wages of workers went down; more plants moved to Mexico and to overseas, low-cost labor markets; unemployment went up; crime doubled and “contract workers” with no benefits became institutionalized. For the first time in history, Social Security was taxed. Wherein lies the magic of a new tax cut that will largely benefit the same wealthy individuals and corporations?

PHILIP S. BRAZIL

Laguna Hills

Dreier’s article should be “must reading” for all politicians and economists. However, he seems to disregard his own evidence when he says that “cutting the capital-gains tax is the best way” to improve the economy; because he later points out that “to achieve deficit reduction and job creation simultaneously, the best approach is to reduce the capital-gains tax rate to 15% and index the rate to inflation.” I assume he meant to say “index the gain to inflation.”

One of the stock arguments of those who oppose lowering the tax on capital gains is that it unfairly lowers the tax on the profits of stock and commodity speculators. And this is a justifiable argument. Another stock argument against lowering taxes on capital gains is that it would benefit only the wealthy. Anyone who believes that hogwash is sadly uninformed.

Actually, the very best and fairest way to tax capital gains is to index the gains to inflation (as determined by the Consumer Price Index), and tax the corrected gain at the same rate as other earnings. I suggest that this would create more jobs and lower the deficit more effectively than any of the other proposals, and would be the most fair and equitable system.

R. C. ANDERSON

San Gabriel