September 20, 2001

Washington, D.C.-The Small Business Survival Committee (SBSC) today issued a report that illustrates the economic benefits of cutting capital gains taxes.

SBSC President Darrell McKigney noted: "In these uncertain times, it is critical that Congress and the White House take measures to restore economic confidence and growth.  This new SBSC report makes it clear that capital gains tax reduction needs to be the centerpiece of any pro-growth economic package."

SBSC chief economist Raymond J. Keating, author of "Capital Gains Tax Cut is Crucial for the Economy," pointed out: "Taxing capital gains makes no economic sense. Capital gains taxes reduce potential returns, and therefore, restrain both risk taking and the economy.  Particularly now, the U.S. economy needs more risk taking and more investment."  

Keating continued: "The economy began to slow in the third quarter of last year, and subsequently continued slowing.  Quite worrisome was the dramatic fall off in investment. Obviously, the horrifying terrorist attacks of September 11 have added to our nation's economic uncertainty in the near term, and already are taking a toll on many industries. Both investor and consumer confidence need pro-growth public policies to be implemented, and capital gains tax reduction needs to be the centerpiece of any pro-growth policy package."

The report documents the following:

Periods when the capital gains tax rate was either nonexistent, or relatively low, the U.S. generally experienced above-average real economic growth.

The U.S. was experiencing a below-average recovery coming out of the 1991 recession until the capital gains tax was slashed by 29 percent, from 28% to 20%, in 1997.

The reason that our economy benefits from capital gains tax reduction is because incentives for investing and risk taking are enhanced, and it is clear that the capital gains tax does impact the level of venture capital investment and the creation of new businesses.

Finally, SBSC's report calls for eliminating both individual and corporate capital gains taxes.  Short of that, it is advised that both the individual and corporate capital gains tax rates be reduced dramatically, and that capital gains be indexed for inflation both retroactively and prospectively.

For a copy of "Capital Gains Tax Cut is Crucial for the Economy," visit SBSC's website at www.sbsc.org.  For more information, please call SBSC at 202-785-0238.  SBSC is a nonpartisan, nonprofit small business advocacy group headquartered in Washington, D.C.