Georgia HB 481 (JOBS Act) Talking Points – Capital Gains Tax Cut

- There are multiple real –world examples where capital gains tax cuts led to an increase in revenue
o When the federal capital gains tax was decreased from 28 percent to 20 percent in 1980, revenues rose from $12.5 billion to $18.7 billion (Cascade Policy Institute)
o When the federal rate was again lowered from 28 percent to 20 percent in 1997, revenues rose from $260 billion the prior year to $400 billion, and another $50 billion each in 1998 and 1999 (Cascade Policy Institute)
o In 2003, when the federal rate decreased from 20 percent to 15 percent, a $27 billion revenue loss was projected over the following two years. In fact, the government saw a $26 billion increase in revenues.

- That the majority of capital gains taxpayers are high-earners is a myth
o A study by the Beacon Hill institute found that 21 percent of Massachusetts’ capital gains taxpayers earned less than $20,000, while only 8 percent earned above $200,000
o The same study found that the effective tax increase would be 42 percent greater for low-income taxpayers than for high earners
o During periods of economic hardship, low-income citizens tend to rely more on income from capital gains as wages fall. A decrease in Georgia’s capital gains tax rate will lessen the burden low-income families are already facing

- Static budget scoring does not tell the entire story
o A study on HB 481 by the Georgia Budget and Policy Institute assumes an expected annual loss of $400 million attributable to the capital gains tax cut. GBPI’s analysis vaguely glosses over evidence of economic stimulus and government revenue growth, dismissing numerous precedents out of hand
o The bill’s fiscal analysis states that “the reduction in Georgia’s tax rate on capital gains could reduce the likelihood of individuals with substantial capital gains from moving to, say, Florida, to avoid paying any state income tax on the capital gains.” That erosion of Florida’s comparative tax advantage certainly makes Georgia more attractive to investment, and allows government to reap a tax windfall as a result. On average, senior citizens are three times more dependent on capital gains for their income than other households. Cutting the rate in Georgia could make the state a more appealing choice for retirees who might otherwise only consider Florida as a place to reside.
o Florida is not the only state with a competitive capital gains tax advantage over Georgia. Among the state’s other four neighbors besides Florida (Alabama, North Carolina, South Carolina, and Tennessee), only North Carolina has a higher rate. Among the entire 15-state region that the Census Bureau defines as “the South,” (excluding the District of Columbia), only two have higher capital gains rates than Georgia (two others have the same rate as Georgia).
o Testimony by the American Council for Capital Formation stated that after the 1997 federal capital gains tax cut, the S&P 500 increased 30.1 percent over the subsequent two years. 25 percent of that economic growth is directly attributable to the capital gains tax cut.
o Put succinctly: GBPI’s $400 million revenue loss is excessively pessimistic and not supported by real world precedent
o Due in part to changes in the 1986 federal tax reform law, Oregon’s state tax rate on capital gains rose from 4 percent to 9 percent. A comprehensive study conducted for the AOI Foundation determined that reducing the rate back to 4 percent would result in a 13 percent–17 percent increase in venture capital funding for Oregon. Also, depending upon the modeling and assumptions about faster turnover of assets, increases in asset values, and macroeconomic effects, the revenue impact could be as much as a $148 million per year gain (Conerly Consulting analysis for AOI Foundation)

Using practical precedent as a guide, the capital gains tax cut provision of HB 481 is likely to spur higher levels of investment in Georgia, resulting in significant economic growth. It will also likely represent a revenue increase to state government. And its positive economic impact will be felt by Georgians of all income levels.

Enactment of HB 481 will represent one of the few forward-looking, pro-growth tax cuts in the country during this economic downturn. Georgia will stand as a model for other states looking to embrace pro-taxpayer policies in the midst of a revenue crunch.

The Republicans have become the party of tax increasers, big government spenders, and funders of the banksters (gangster bankers).