Gibson Distorted The Truth On Capital Gains

It is clear to pretty much everyone that saw Wednesday night's debate that the episode was a gotcha politics styled, banishment from journalism worthy, shoddy and miserable event. One moment in particular focused on capital gains taxes, probably the only time any part of the economy was mentioned. Gibson hammered Obama on wanting to raise it, claiming that when Bush lowered the tax, revenues went up. Sounds good for supply-siders when he says it, but is it true?

From Time Magazine's Justin Fox:

Here's a chart of the last ten 12 years of capital gains tax revenues, which first ran in a post I did in January:

My point in that post was that fiscal year 2007 is going to represent a peak in capital gains tax receipts not to be equalled for years to come--and it's lower than the previous peak in 2000. Over the course of the business cycle, a lower capital gains tax rate left us with less revenue. Now there were other factors at work--the stock market bubble that finally began to deflate in 2000 was of historic proportions. But you certainly can't declare from that evidence that cutting the rate increased revenue.

And this is even leaving aside the basic point that the trend for tax revenue in a growing economy is going to be up. So if you're going to claim that a tax cut increased revenue, you need to offer some evidence that revenue rose even more than would have been the case if rates had remained the same.

There are all sorts of good arguments for keeping capital gains tax rates relatively low (but also some good ones for keeping them pretty close to rates on regular income). But to repeat: Cutting them does not increase tax revenue. And that Charlie Gibson was spouting the totally bogus line that they do on national TV last night was an outrage. One of many, I hear.

Yes Justin, one of oh so many outrages. All of them add up to one thing, a moment of erosion for the fourth estate and the soundness of our democracy. ABC's debate and the questions from Gibson/Stephanopolous were atrocious, and should be an example for all future moderators to avoid at all costs.