How the taxation of capital affects growth and employment

Chairman Casey, Vice Chairman Brady, and Members of the Committee, thank you for inviting me to appear today to discuss how the taxation of capital affects the economy.

This nation employs several methods for taxing capital income, both at the individual and the corporate level.  There is a massive economic literature that documents strong theoretical and empirical support for the United States to reduce its capital taxes. The consensus amongst economists on these issues has had a hit-and- miss record driving political consensus. There has been a strong bipartisan consensus regarding capital gains taxes, which were cut dramatically by Jimmy Carter in 1978, and again by Bill Clinton in 1997. Dividend taxes are also currently low, having been extended on a bipartisan basis in 2010. There has been less of a political consensus regarding the corporate tax, and the U.S.'s currents status as the highest tax country in the developed world is likely the most pressing tax policy issue of the day.

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