top of page
Search

The Cato Institute's Laughable Conceit

  • Writer: D Dd
    D Dd
  • Aug 12, 2018
  • 3 min read

Updated: Sep 13, 2021

We've been down this road before, but the "Merchants of Doubt" are at it again. Time was when "Think Tanks" like the Cato Institute were once respected voices in the world of policy ideas. Today, they've been reduced to sinecures for mouthpieces of little talent, paid to spread ideas that are, let us be blunt, lies. It gets to the point where if you read enough of their output, you can't even believe they believe it. Here's another one, on my feed, from a Cato "scholar." (sic)

Now anyone who's actually lived through these times, or knows modern economic history, can easily spot how dishonest this is. Note the headline of the chart states "Lower Capital Gains Rates in 1978, 1982, 1997 and 2003 Produced Higher Real Revenues." In 1978, the rate was dropped to 28%, and the exclusion was increased. But their own chart shows no meaningful gains in revenue. The first meaningful upward spike seen in the Blue line for "Real Revenues" occurs in 1982, coincidentally after the Cap Gains rate was dropped to 20%. Of course, the Fed Funds rate was slashed by, oh, a mere 1000 basis points during this time, but as we all know, monetary policy on that scale HAS to be meaningless in the face of an 8% cut in the taxation of assets that less than 20% of the population holds, right?

Wake up, America!

Then, revenues start to dip whilst approaching the "it's the economy, stupid" phase, and whaddya know, revenue recovers beginning in 1994, even though the rate hasn't even changed. How did THAT happen? Revenue crests in 2000, when the economy is about as strong as it's ever been, and then that pesky "dot-com bust" occurs, and a capital gain is about as easy to find as native intelligence at the American Enterprise Institute. It then gets cut to 15%, and revenue goes up again, but gee, I dunno, once again, it seems to be in tandem with a rising economy. Then, despite the rate being held at 15%, it plummets to new depths not seen in 40 years, and I think it might have been due to that nasty financial crisis, but, I'm no scholar, and I could be wrong. I mean, charts don't lie, right?

Well, the chart above seems to tell us that economic performance, as measured by GDP, seems to be a good thing for generating revenues no matter where the Capital Gains tax rate sits. This chart is by percentages, so you can see how one metric affects the other.

Now, if you want to look at it in nominal dollars, here's the trend for both GDP and tax receipts.

The simple fact is, and no, you don't have to be a "scholar" to see it, (or even a Fellow!) is that the Capital Gains tax level has absolutely no correlation to receipts.

What effect DOES it have? As I've mentioned before, taxes are not about revenues, or funding for aircraft carriers and highways, they're all about DISTRIBUTION. They're about who gets to keep what in this great big economy of ours, and now, more than ever, it is as unequal in its distribution as at no other time in our history. This is going to be one hell of a thing to undo, if and when the chance ever comes.

Besides that, there is the sad fact that these "stink tanks," as they've come to be known, still retain that faint, but fading aura of respectability and the imprimatur of legitimacy. That will take time to undo as well.

 
 

Recent Posts

See All
"All Real Estate Is Local"

With apologies to Tip O'Neill, there's been some talk about housing costs finally trending down. Regular followers know I've been ranting...

 
 
Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Classic
  • Twitter Classic
  • Google Classic

FloMartin Securities, Inc.

Donald R. Davret, Investment Advisor Representative

www.sec.gov

www.sipc.org

 

Investment advisory services are offered through FloMartin Securities, Inc, an Investment Advisory firm. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.
All investment strategies have the potential for profit or loss. Changes in investment strategies, economic conditions, contributions or withdrawals may significantly alter a portfolio’s performance. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. Past performance is no guarantee of future success. We cannot guarantee that a portfolio will match or outperform any particular benchmark. None of the content should be viewed as an offer to buy or sell, or as a solicitation of an offer to buy or sell the securities discussed.



This website is a publication of FloMartin Securities, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.​


Information on this website does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information on products and services. A professional adviser should be consulted before implementing any of the options presented

  • Wix Facebook page
  • Twitter Classic
  • Google Classic
bottom of page