Washington, May 6, 2003-A proposal on Capitol Hill
to cut taxes on long-term capital gains and dividends would prompt
immediate and sustained economic growth,
calculations
by The Heritage Foundation's
Center for Data Analysis
(CDA) show.
Reducing the income tax on long-term capital gains and dividends to
5 percent for low-income filers and to 15 percent for those in
higher tax brackets would create 252,000 new jobs in 2004 and an
average of 367,600 jobs annually over the next five years, CDA
economists found. It also would boost gross domestic product by $21
billion next year and by an average of almost $31 billion annually
through 2008.
The result: A stronger economy that would yield additional tax
revenue-enough, according to the CDA, to reduce the net "cost" of
the tax cuts from an estimated $277 billion over a 10-year period
to $147 billion.
The "5/15" proposal is part of a $550 billion tax-cut plan designed
by House Ways and Means Committee Chairman William Thomas. And
while it wouldn't strengthen the economy as much as the $726
billion plan backed by the White House, it still provides
meaningful stimulus to a struggling economy, says Heritage tax
analyst
Rea Hederman.
"The Thomas plan works for the same reason the president's plan
works," he said. "Potential investors will be more willing to
invest because they will pay less tax on the returns on their
investment. And with the cost of capital declining, corporate
managers will find it more profitable to invest in projects they
previously had ruled out."
More information is available online at Heritage's "Reality Check"
on taxes:
www.heritage.org/research/taxes/taxbriefingroom.cfm