U.S. Capital Gains Tax Rate Uncompetitive With Many Other Major Economies

Wed Oct 29, 2008 1:34pm EDT

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Canada, Japan, Mexico, Germany, Taiwan among Countries With Lower Long-Term
Individual Rates

WASHINGTON, Oct. 29 /PRNewswire/ -- The U.S. capital gains tax rate
compares unfavorably with many major economies, trading partners and
developing countries, according to a new report by Ernst & Young LLP,
commissioned by the American Council for Capital Formation (ACCF).  The report
compares individual long-term capital gains taxes among 25 major economies of
the world and more than half of the countries surveyed have individual capital
gains tax rates lower than that of the U.S.
    (Photo: http://www.newscom.com/cgi-bin/prnh/20081029/NEW101 )
    At a 15% long-term capital gains tax rate, the United States ranks higher
than countries with lower, more competitive rates including Canada (14.5%),
Italy (12.5%) and Japan (7%).  Many countries have a capital gains tax rate of
zero (0%) including Germany, Mexico, India, Malaysia, Taiwan and Honk Kong.
    "A low capital gains tax rate has an important role to play in fostering
economic growth and playing on a competitive global economic field," said ACCF
Senior Vice President and Chief Economist Margo Thorning. "The U.S. falls far
short when compared to many other countries and stands to be at even greater
international disadvantage if capital gains tax rates are increased once the
current 15% rate expires in 2010."
    ACCF noted that since the historic reduction in capital gains taxes
initiated in 1978 by the late Congressman Bill Steiger, lowering taxes on
capital gains has been a crucial element in promoting the entrepreneurial
drive on which the U.S. economy thrives. Entrepreneurs are a major force for
technological breakthroughs, new start-up companies, and the creation of high
paying jobs. Many today believe that the '78 cut in capital gains tax rates
not only helped make Silicon Valley the center of technological breakthroughs
but has also had a strong, positive, and lasting impact on overall investment,
economic growth and job creation in the U.S.
    The 2003 capital gains tax cuts have also been a boon to the U.S. economy.
Extension of the 15% rate is crucial to maintaining the U.S. competitive edge
against its major trading partners.
    "As the next president and congress face the economic crisis, they must
also be mindful of maintaining U.S. competitiveness when it comes to savings,
investment and policies which stimulate innovation and entrepreneurship.
Raising the capital gains tax rate is the wrong policy to pursue," Thorning
concluded.
    To view the ACCF report and an international comparison table of U.S.
capital gains tax rates against other countries, go to
http://www.accf.org/publications.php?pubID=111
    Founded in 1973, The American Council for Capital Formation (www.accf.org)
is a nonprofit, nonpartisan economic policy organization dedicated to the
advocacy of tax, energy, environmental and regulatory policies that encourage
saving and investment.
SOURCE  American Council for Capital Formation

Mike Burita for the American Council for Capital Formation, +1-202-420-9361,
mburita@accf.org
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