Increasing capital gains taxes would discourage investment when it is most needed to spur economic growth and job creation. [1] Studies have found that lower capital gains tax rates enhance economic growth and encourage entrepreneurship, benefiting all taxpayers with investments. [2] Higher capital gains tax rates cause lower levels of new venture funding and impact entrepreneurship decisions, which can impede job creation. [3] In short, increasing investment taxes is counterproductive for business and the economy.

1. Should the 'Buffett Rule' Become Law?-Counterpoint
Proponents argue that the added revenue would help the deficit and bring more fairness to the tax code.
Rejecting this idea is tantamount to rejecting baseball, Berkshire Hathaway and apple pie.
The reality is far different. Increasing the tax rate on all millionaires to 30% would not eliminate the deficit.
IRS data shows that a10% surtax on those earning over a million dollars could raise $70 billion- a fraction
of the overall funding gap of $1.2 trillion. To close this gap with taxes alone would require doubling tax
rates for all taxpayers.
For the wealthy a greater percentage of their income comes from investments in the stock and bond
markets. Capital gains taxes are paid on investment income. Short-term capital gains are taxed at
an ordinary income tax rate while long-term gains are taxed at a lower rate.
The proposal unfairly targets these capital gains rates. In 2013 some tax cuts expire and new rules are
set to raise capital gains rates. In 2008–2012 the tax rate on qualified dividends and long term gains was
0% for lower tax brackets. After 2012 dividends will be taxed at the taxpayer's ordinary income tax rate.
The long-term capital gains rate will be increased to 20% for higher income taxpayers.
The U.S. tax code is a morass of complex regulations. If we want a simple code we need a flat tax rate
with no deductions. Increasing capital gains taxes does not prevent sophisticated tax shelters involving
Olympic level dressage horses, real estate partnerships, or leveraged trusts.
Increasing taxes on gains discourages investment at the time we need it most. Lower capital gains rates
make new business ventures more attractive and help hold down capital costs. The higher the capital
gains tax, the more difficult it is for management to retain earnings for investment in productive projects.
If the tax on potential capital gains is increased, either the pool of funds will be reduced or investors will
have to accept a lower rate of return. Entrepreneurs rely heavily on infusions of capital from both informal
and formal sources. An increase in tax rates will reduce the pool of available funds.
Net new job creation comes disproportionately from new companies. These companies carry higher risk,
and therefore, the expected return to investors must be higher. Taxing returns decreases the pool of
available funds.
Increasing employment and acceleration of economic growth is a top priority, so we need to understand
the impact of tax increases. Studies have generally found the following:
Lower capital gains tax rates
• Enhance economic growth
 Encourage entrepreneurship
 Benefit almost all taxpayers, since investments in capital assets are widely held
not just by the wealthy but by those with 401Ks and pensions
Higher capital gains tax rates
• Cause a lower level of new venture funding: lower capital gains tax states saw
increases in venture funding compared to higher capital gains tax states in the
U.S.
 Higher capital gains taxes impact entrepreneurship decisions including “starting
and expanding a business, obtaining financing; and whether and when an
entrepreneur sells the business.” (Gentry, 2010)

2.  Impede job creation. Higher capital gains tax states have lower employment
growth while lower capital gains tax states have higher net job creation compared
to states taxing capital gains as ordinary income.
In short – increasing investment taxes is just plain bad for business.
Sally Hamilton is a LeBow College Clinical Assistant Professor of Accounting at the Sacramento Center
for Graduate Studies. She and her CPA spouse have paid taxes on capital gains and have survived two
IRS audits. Their effective tax rate over the last 4 years is 26%.