Everybody's Doing It: Abolish The Capital Gains Tax
By Rod D. Martin
April 17, 2006
How many times have we heard liberals
exhorting America to act like the rest of the world?
For literally decades, the denizens of the left have been
badgering us to adopt socialized medicine, abolish capital
punishment, and support other "progressive" measures so we
can appear more "enlightened" to their friends in Old Europe
and other lovely places.
Never mind that their ideas are anything but progressive,
particularly if by "progressive" we mean the achievement of
actual progress. Hyper-progressive France, for instance, has
had double-digit unemployment for most of the past quarter
century, even with a 35-hour work week; its youth
unemployment rate stands at 23 percent, its Muslim-heavy
suburbs are 50 percent unemployed, and those relative few
who do get to work pay a combined tax rate of 68 percent.
They are little more than (very self-satisfied) serfs.
No wonder the whole world has been going the other
direction for twenty years! The left's "enlightened" ideas
invariably restrict individual freedom, weaken personal
responsibility, sap private initiative, and empower
government bureaucracies at the expense of the people
they're supposed to serve.
But since everybody's doing it (and let's just ignore
that vast world of countries which aren't so foolish), so
must we. Thus speaketh John Kerry and his friends.
But for those of us with teenagers, we've heard this song
And the answer is always, or should always, be the same:
"No, young man/lady, everyone is not doing it -- and even
if they were, that wouldn't make it right."
There is, however, at least one policy idea that much of
the world has already embraced which liberals stridently
oppose. And much like wearing clothes in public or not
eating with your fingers, it's one of those things they
ought to follow.
It's the abolition of the capital gains tax.
Of the thirty member nations of the Organization for
Economic Cooperation and Development (OECD), fourteen don't
have any individual capital gains tax at all: they have
wisely chosen not to eat their seed corn, and to let their
citizens build a future for themselves and for their
But don't expect liberals to join the crowd on this one.
Most of them even opposed President Bush's reduction of the
rate to 15 percent; and before the Easter recess, they again
blocked efforts to make that tax cut permanent. Calls for
abolition are met with the usual shrill class-warfare bleats
that reform favors the rich -- even though working
middle-class families would benefit most of all.
This is a case where we really ought to join the crowd.
The capital gains tax is the veritable poster child of
unfairness, a gross example of double taxation at work.
Corporate income is already taxed when earned. That income
belongs to shareholders, most likely your IRA or other
savings. So when Washington taxes it again when you sell
your stock, you're getting hit a second time on the exact
same money. Not some corporate fat cat somewhere. You.
The capital gains tax is a wealth destroyer, but in a
much more insidious way than just this. The logic is
straightforward. Anytime government taxes something, you get
less of it. So when government taxes capital formation --
people investing their money so businesses can expand,
research and hire -- it creates a colossal roadblock to
entrepreneurship and a huge disincentive for investment, the
essential building blocks of prosperity for any family or
What's true logically has proven to be tragically obvious
empirically. As just one example, when Washington raised the
capital gains tax rate from 20 percent to 28 percent in
1986, funding by venture capitalists plunged by almost 60
percent over the next five years.
And since so many developed or developing nations have no
capital gains tax, ours places us at a serious disadvantage.
Many worry about China, but do they consider that China is
one of those OECD nations completely free of this
wealth-destroying tax? In fact, those who wring their hands
the most about Chinese competition are among the strongest
opponents of abolition. But the absence of a capital gains
tax is one of the key reasons for China's surging economy,
and for its year-after-year nine percent growth rates (three
times our own).
We could do the same thing here, unleashing a torrent of
capital and business formation, job creation and prosperity.
And while Leftists scream about "lost government revenues",
all that new economic activity -- and all those new
tax-paying workers -- would actually flood government
So there's every reason to abolish the capital gains tax.
And after all, everybody's doing it.
Rod D. Martin is Founder and Chairman of TheVanguard.Org.
A former policy director to Arkansas Gov. Mike Huckabee and
Special Counsel to PayPal.com Founder Peter Thiel, he is a
member of the Board of Governors of the Council for National
Policy, Executive Vice President of the National Federation
of Republican Assemblies (NFRA), and editor and co-author of
Thank You President Bush, the definitive handbook to the