Larry Summers argues it’s plausible that we can raise another $1 trillion+ over the next ten years – here’s how:
The failure to tax capital gains at the point of death costs the federal government about $50bn a year. Since its removal would both raise money in the future, and induce earlier and greater realisations of capital gains in the short term, its removal would likely add well over $500bn during a 10-year period. I believe it is plausible to raise $1tn over the next 10 years by going after provisions that cause what adds to wealth and spending not to be regarded as income.
Owen,
I have heard conservative economists make a very convincing argument against capital gains taxes on the basis of fairness, which is to say, why should we tax the purchase of “future goods” at any higher rate than we tax the purchase of goods in the present?
I support more progressive capital gains taxes, but I justify it by utilitarian metrics. Is there a “fairness” argument in support of progressive capital gains taxes that you like to use? My Econ profs are rather conservative, so I could use some backup from the other side.
There are good reasons for lower taxes on capital (including as growing intertemporal distortions), but there are a wide range of views on this issue. See this post on that: http://owenzidar.wordpress.com/2012/10/09/top-economists-on-whether-we-should-tax-capital-income-less-than-labor-income/
In terms of the case for more progressive capital gains, Saez Diamond JEP 2011 should be the first place to look: http://elsa.berkeley.edu/~saez/diamond-saezJEP11full.pdf