"Charlie Gibson’s Cocktail-Napkin Economics"
Our guest blogger is Robert Gordon, a Senior Fellow at the Center for American Progress Action Fund.
Tonight Charlie Gibson channeled cocktail-napkin economics to argue, with the certainty that usually comes only from religion, that cutting capital gains taxes raises revenue.
As Jason Furman explains here, and as Len Burman explains here, the best evidence suggests otherwise. Cutting these taxes may lead to a temporary spike in revenue, because people sell stock to realize gains while rates are low. But over the long term, the biggest owners of stock—the wealthiest Americans—will mostly save what they will save, regardless of fluctuations in the rate.
The Congressional Budget Office notes that “the potentially large difference between the long- and short-term sensitivity of realizations to tax rates can mislead observers into assuming a greater permanent responsiveness than actually exists.”
Charlie Gibson tonight misled millions of observers of a presidential debate.