{
  "id": "RL30040",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL30040",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 101223,
      "date": "1999-07-14",
      "retrieved": "2016-05-24T20:43:56.215941",
      "title": "Capital Gains Taxes, Innovation and Growth",
      "summary": "The growth effect of cutting capital gains taxes on innovation, where lower capital gains taxes\nmay\nencourage investment in new, \"high-tech\" firms, has been a subject of continued interest. A recent\nCongressional Budget Office study, while concluding a limited and uncertain effect on growth\ninduced by capital gains tax cuts through normal savings and investment channels, noted a lack of\nevidence on the effect through new firm formation. \n  The belief on the part of many venture capital advocates that the capital gains tax plays an\nimportant role developed because the slump and recovery in the venture capital market in the\nseventies and early eighties was associated with a rise and fall in the capital gains tax. More recent\nevidence, however, indicates that there is no apparent relationship between venture capital\ninvestments and the capital gains tax.\n  There are several reasons why the effect of capital gains taxes on growth through investment\nin firms would be expected to be small. First, most capital gains accrue to mature firms and real\nestate; only a small share is associated with small and new firms. Most formal venture capital is\nprovided by institutional investors not subject to the capital gains tax. Secondly, a capital gains tax\ncut will not specifically favor this type of investment, but will benefit a wide range of investment\nopportunities. Indeed, it could actually discourage such investment by reducing the present\ndifferential tax benefit for new stock issues. Nor is the capital gains tax likely to be an efficient\nmechanism to encourage acquisition of skilled executives through stock options, since these stock\noptions are often not subject to the capital gains tax and since only a tiny fraction of gains is\nassociated with stock options. \n  It might be possible to devise more targeted provisions, although such provisions tend to be\ncomplex and may, themselves, be relatively unsuccessful in stimulating investment. This report will\nbe updated as developments warrant.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": false,
      "formats": [
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          "encoding": null,
          "url": "http://www.crs.gov/Reports/pdf/RL30040",
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          "images": null
        },
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          "format": "HTML",
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        }
      ],
      "topics": []
    }
  ],
  "topics": [
    "Economic Policy"
  ]
}