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Show I rt Your Man jfk ? In WashingtonpJT y By U.S. Senator Orrin G. Hatch The Steiqer Amendment - An Economic Plus A young Wisconsin member of the U.S. House of Representatives is building quite a reputation for himself these days over a very simple tax-cutting proposal that could be just what the doctor ordered for the American economy. Rep. William Steiger has introduced an amendment which would simply cut, by half, the federal capital gains tax rate. The current rate is at a maximum of 49.1 percent, and Rep. Steiger wants to roll it back to the pre-1969 period of not more than 25 percent. The first obvious concern is what would that do to the U.S. Treasury which is already in debt by nearly $800 billion? The Department of the Treasury says the cut would be an enormous loss to the treasury in a "handout to rich investors." Treasury Secretary Michael Blumenthal, as you might have guessed, is against the tax cut. He is using the tired, old approach of "static analysis" which does not take into account the spin-off benefits to the economy which will naturally come if the Steiger Amendment is approved. As the Wall Street Journal argues: "A lower tax on capital gains will raise more money, not less, for the government. Treasury insists on using 'static analysis' . . . making the convenient but plainly silly assumption that nothing else in the economy changes as a result of different tax rates." The Journal editors go on to say that with "dynamic analysis" economists can i calculate the feedback effects from a '' J capital gains tax cut. They conclude, " "With most taxes, you have to argue . C about the possible dynamic effect. But on the capital gains it is written in black and white." What the Wall Street Journal is ' referring to is the return in tax collections before and after the 1969 increase. Capital gains returned $7.2 billion in 1968 but dropped to $4.8 billion in 1969 after the higher rate was imposed. After ten years the return from capital gains taxes is just now reaching the pre-1969 $7 billion level. But President Carter has v indicated some inclination to raise ' capital gains taxes higher. He c contends that the rich benefit from lower capital gains taxes, and they j should be heavily taxed. Congressman Congress-man Steiger answers, "The tax system ought to be designed to encourage economic growth, to stop ' inflation, and create jobs. It is better," he says, "to let the system benefit a few for the overall benefit of the economy than to meet some abstract and ill-defined standard of fairness." |