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Blog: Cut Capital Gains Tax to Spur Investment


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Last week, the federal government announced that the economy shed another 95,000 jobs in September and the unemployment rate remained unchanged at 9.6%. Unemployment has now been higher than 9.5% for 14 consecutive months -- the longest stretch since the Great Depression.

Months after the Democrats' stimulus bill became law, unemployment still hovers near 10% and businesses are reluctant to hire. Clearly, the Democrats' economic policies are not working.

I've laid out a series of policies that I believe will help put our economy back on track for an economic recovery. I recently explained in detail the first of my policy proposals, and I'd like to continue today by explaining the second point on my Roadmap to Economic Recovery: a reduction of the capital gains tax to incentivize investment, particularly for investments into start-ups.

Our first priority for legislation involving capital gains taxes should be to ensure that the reductions in the capital gains tax rates enacted by the 2001/2003 tax cuts are extended. If no action is taken by Congress before the end of this year, then the rates for all taxpayers will increase during an already challenging economic time.

Many in Congress, including several Democrats, agree. Prior to their adjournment, more than 40 House Democrats signed a letter to Speaker Pelosi asking her to consider an extension of the capital gains tax cuts for all taxpayers. As the Democrats' letter said, "A dividends tax increase would impede our nation's economic recovery by decreasing the amount of capital that companies would have access to, thereby slowing the private sector's ability to grow and create jobs."

We need to encourage investment into our economy, and by reducing the capital gains tax rate, we can incentivize investment by making the potential return on an investment more lucrative and freeing up more capital to be invested.

Specifically, we need to provide incentives for investors to risk their capital during the earliest stages of a new company's development. Reducing the tax rate on these sorts of investments will help drive capital into these startups. New companies are a prime driver for job growth, and since 1980 nearly all net job growth has been created by new firms. Further incentivizing investment into these new companies will help ensure they have access to the capital they need to survive that first year and prosper.

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