Newt Gingrich - Taxes

Last Updated: Jan 14, 2012

Summary

Congressman Gingrich has long advocated for reducing taxes as much as possible. He views obtaining the lowest possible tax burden on the population as in the best interests of the economy, and the duty of the representative. He has advocated for the elimination of the death tax or estate tax, for the elimination of the capital gains tax, and the reduction of the business tax. He does not support raising taxes to decrease the deficit as he does not believe the increase in taxation will be met in a similar reduction in spending.

Speaker Gingrich supports the Bush tax cuts. In 2006, he argued for their extension by stating that allowing them to lapse would be the largest tax increase in history. His 2012 tax plan has the permanent extension of those cuts as one of its primary components.

In March of 2008, Speaker Gingrich began to advocate for an optional flat rate tax that people would be able to opt into if they desired. He placed the level of taxation at around 17% for all people and corporations. He claimed that roughly 42% of the nation would pay no taxes under this system. Congressman Gingrich has proposed a 15% optional flat tax as part of his 2012 tax platform. As part of this system, he also proposed replacing the current $3,700 tax exemption with a $12,000 one.

Speaker Gingrich somewhat supports a Fair Tax consumption tax method. However, he would not support enacting such a measure until the income tax was ended so that both did not exist at the same time. He also noted that there would need to be an enforcement bureau to ensure that companies were paying the sales tax.

Speaker Gingrich has consistently argued throughout the 2012 campaign that the capital gains tax should be ended and that the corporate tax rate should be reduced by half. His 2012 tax plan mirrors these ideas.

Stop the 2013 tax increase to promote stability in the economy. Job creation moved from stagnant to improving in the two months after Congress extended tax relief for two years. We should continue what has worked by making the rates permanent.
Make the United States the most desirable location for new business investment through a bold series of tax cuts and regulatory reforms, including:rn
- Eliminating the capital gains tax to make American entrepreneurs more competitive against those in other countries;
- Dramatically reducing the corporate income tax (the highes in the world) to 12.5%;
- Allowing for 100% expensing of new equipment to spur innovation and American manufacturing;
- Ending the death tax permanently.

The American Eleven

In September of 2006 Congressman Gingrich released an article through the Human Events website noting eleven items he believes should be pursued. One of those items was repealing the Death Tax.

Repeal the Death Tax, for Good. The American people have consistently supported the total repeal of the death tax and the House should simply pass it once a week and attach it to various Senate bills to force the Senate to deal with it again and again. Let liberals explain why they oppose something that more than 70% of the country favors.

Opposition to 2006 Bush Tax Expiration

In April of 2007, Congressman Gingrich wrote an article for Human Events discussing his opposition to allowing the Bush tax cuts to expire in 2006.

The Return of the Liberal Tax Increase
by Newt Gingrich
04/02/2007
Tax increases are personal for all of us. They take money out of our pockets and hurt the economy, destroying job opportunities for millions of Americans.
But tax increases are personal for me for another reason. Remember the Clinton tax increase of 1993? It was, at the time, the largest tax increase in history -- a whopping $240 billion of our hard earned cash went to government over five years. So it came as no surprise to most of us (except the liberal authors of the tax increase) that this raid on the taxpayers helped set the stage for an unprecedented Republican victory in 1994.
The (New) Largest Tax Increase in History
Americans take tax increases personally -- and so do I. Liberal tax-and-spend policies helped motivate Americans to elect a new center-right House majority for the first time in 40 years.
But guess what? Liberals are at it again.
Just three months into their majority, Democrats are once again proposing the biggest tax increase in history.
This month, the House of Representatives will debate the Democrats' 2008 proposed budget. If it is passed, this budget will impose the largest tax increase in history on American taxpayers -- totaling nearly $400 billion over five years. Families with children, low-income families, and small businesses all would be hit with hundreds if not thousands of dollars in increased taxes.
Just what taxes will be raised? Here are some of the specifics of the liberal proposal:

The 10% Tax Bracket Will Become 15%: More than five million families and individuals who previously owed no taxes will become subject to taxation.

Marriage Penalty Relief Will Be Eliminated: 23 million Americans will owe an average of $466 in additional taxes in 2011.

The Child Tax Credit Will Be Cut in Half: 31 million Americans will pay an average of $859 more in taxes in 2011.

The Fair Tax

In 2007, Speaker Gingrich was asked about the Fair Tax system. He states that he supports the tax in theory, but that any effort to enact the measure would have to end the income tax at the same time so that Congress did not have both mechanisms to slowly raise rates. He also states that it is disengenuos to state that the fair tax system does not require an enforcement provision such as the IRS, it just shifts the enforcement from the taxpayer to the business that would collect the sales tax.

Support for Tax Reform

In March of 2008, Congressman Gingrich issued an article for Human Events noting his support for tax reform and for a possible flat tax.

Time for Real Change on the Economy and Taxes
by Newt Gingrich
03/18/2008
The news on the economy this week is increasingly unsettling.
Gas prices continue to rise, with inflationary ripple effects throughout the economy. And the bust of the subprime mortgage market has now spread throughout the credit markets to such a degree that Bear Stearns, the fifth largest American investment bank, was sold last weekend in a firesale.
Worse still, Wall Street's banks have essentially stopped lending. The appetite for any type of risk has come to a screeching stop. The problem is that a modern economy can't grow, let alone be sustained, for very long when banks stop lending. Companies use loans to finance operations, new equipment, and new acquisitions. That means if companies can't borrow, many will ultimately go out of business and thousands of people will lose their jobs.
First Step: Immediate Action Needed to Stabilize the Housing Market and Keep People in their Homes
In January, I wrote that the Washington insider "stimulus" package that was then being prepared (which subsequently passed) was "too small, too temporary and clearly inadequate for the scale of the economic problems we face."
Since then, our economic challenges have only grown. Seventy percent of economists surveyed by the Wall Street Journal believe the country is currently in recession. In February, national foreclosure filings jumped 60%, with California alone experiencing a 131% jump from the previous year. Many Americans are finding that their largest investment (their home) has lost value; many are unable to sell if they need to move; and others are finding it difficult to borrow money for a new home.
Former Fed Chair Alan Greenspan is warning that the current financial crisis could be the worst since World War II.
The marginal change provided by February's bipartisan stimulus package does not adequately address the foreclosure crisis nor does it provide long term solutions to our fundamental economic challenges.
The first necessary step is to help bring stability back to the housing market by undertaking reasonable measures to help home owners avoid foreclosure. The key for any workable plan is to distinguish between owner-occupied homes threatened by foreclosure and those owned by investor-speculators. We must make sure only to help the home owners, not the speculators. At the same time we should avoid creating new large federal bureaucracies that have the government doing things that it does not know how to do very well.
Texas Congressman Burgess Leads the Way with Real Change on Taxes With an Optional Flat Tax Plan
Fortunately, while plans for short term and temporary mortgage assistance are being drawn up, some members of Congress are offering long term economic proposals that provide real change instead of marginal change -- proposals that meet the scale of the long term economic challenges we face.
One member, Republican Congressman Michael Burgess from Texas, is offering up a proposal that has special resonance for Americans with April 15 just around the corner. It's a plan to save taxpayers time, put an end to special interest loopholes in the tax code, and provide the type of incentives that will put our economy on a course of enduring growth and prosperity: An innovative, one-page, optional flat tax.
A One-Page, Optional Flat Tax Will be Simple to Fill out and It Will Provide the Basis for an Enduring Prosperity
Before being elected to Congress in 2002, Michael Burgess had a 21-year career as a doctor delivering babies in Denton County, Texas. His campaign slogan was "We Need a Doctor in the House". Now the good Doctor Burgess has put together a one page prescription to fix our convoluted income tax system.
Dr. Burgess starts with the fundamental premise that our taxes should be simple, transparent, and low. Dr. Burgess also believes that the economic incentives in our tax code should be clear, predictable, and permanent.
The one-page, optional flat tax proposed by Dr. Burgess is just what it says -- optional. Nobody would be forced into the new system. Taxpayers could continue with their current rates and current deductions, for if they decided that the optional flat tax saved them time and money, they could elect to pay under the single rate optional flat tax system.
The Optional Flat Tax, In Four Bullet Points
Here are the elements of an optional flat tax, in four simple bullet points:

A single rate of tax (for example, 17%) on all individual and corporate taxpayers;

Elimination of all taxes on savings, dividends, and capital gains;

Elimination of the death tax and Alternative Minimum Tax (AMT);

A standard deduction, which would be above the established poverty level so that an optional flat tax would not unfairly target the poor. Approximately the lowest 42% of income earners would be exempt from paying taxes altogether, and any taxes they did pay would only be on the amount that exceeded the deduction.

A Good Idea that is Gaining Ground
Having a flat, single rate tax is a good idea that has been spreading around the world. Eight U.S. states and twenty nations have single rate flat tax structures.

Indiana adopted a flat rate in 2003, and by 2007 the Hoosier state's corporate tax revenues grew by 250 per cent.

Colorado's flat tax, first introduced in 1987, has created repeated surpluses in state tax revenue. This consistent record of success contributed to Colorado reducing the corporate tax rate in 2000 and again in 2001.

Governor Mark Sanford of South Carolina recently proposed an optional flat tax for state income in his 2008 State of the State Address.

The California Republican Party recently adopted the optional flat tax as part of its party platform, borrowing from the Platform of the American People, a "tripartisan" agenda developed by American Solutions.

Most Eastern European nations have flat tax structures, including Russia, and their economies are booming. Since adopting a flat tax in 1995, Latvia's economy alone has grown by an average of twelve per cent each year.

What You Can Do to Learn More about the Optional Flat Tax
Congressman Burgess has recently given two speeches on the House floor detailing his optional flat tax plan. I invite you to read or watch both of them. You can view them here and here.
Dr. Burgess has also prepared this mailer that he is sending out to his constituents. It contains a mock-up of what your tax form would look like under an optional flat tax, along with information about the proposal. With this form, filing your taxes would take less than fifteen minutes.
I encourage you to share this mailer with your friends who might be interested in the idea of an optional flat tax. You can also learn more about the optional flat tax by downloading this chapter from my book Real Change. In it, I describe the benefits of a one page optional flat tax plan.
Then, write your representative and urge him or her to co-sponsor H.R. 1040, the optional flat tax bill. Be sure to let your representative know that you're one of the over 80% of Americans who favors the option of filing their taxes on a single page with one rate of taxation.
It may take time, but I am confident that we will eventually adopt an optional flat tax plan. And when we do, we will put an end to an absurdly complicated system that pits the individual American taxpayer against an army of special interest groups, each trying to advance their narrow agenda at the expense of tax fairness and simplicity. Our tax system robs individual and corporate taxpayers of billions of hours of lost productivity and dilutes the very economic incentives required to keep U.S. workers and companies as the most productive in the world. It can't be replaced too soon.
Real Change Now to Reduce U.S. Corporate Tax Rates, the Highest in the World
Even as we work to win the argument for an optional flat tax plan, we must urge immediate action on reducing America's punishing corporate tax rates. Today's U.S. federal corporate tax rate is 35% -- the second highest in the world -- with the corporate capital gains rate also at 35%. Add in state income taxes and the corporate rate in America averages 40%, making it the highest in the world.
In comparison, the average corporate tax rate in the European Union was 24% in 2007, down from 38% in 1996. How can America compete with the nations of the European Union -- not to mention the emerging economies of India and China -- with this self-defeating, high-tax rate structure?
The U.S. corporations bearing this tax burden are the ones we expect to provide working people with jobs, better incomes, and long term prosperity. If we continue to have the highest corporate tax rates in the industrialized world, we can surely expect to see more and more companies move jobs overseas. As an anti-recession and long term growth measure, Congress should immediately abolish the capital gains taxes on individual and corporate income, and sharply reduce the corporate tax rate to 12.5 %, the same corporate tax rate as in Ireland, which currently enjoys the industrialized world's lowest rate. After Ireland reduced its rate to 12.5% (from a high of 50%), its living standards and world competitiveness rose dramatically.
Good for the Stock Market, Good for Your 401(k)
Abolishing the capital gains tax on individual and corporate income, along with slashing the corporate tax rate, will lead to an immediate jump in the value of the stock market. It will also lead to an immediate jump in the value of every retiree's 401(k). More importantly, it would lead to a burst of new investments in the United States, creating the foundation for long-term economic growth.
At the same time, we should allow 100% expensing of all investments in new equipment within one year of its purchase. This would lead to a boom in equipping American workers with the best and most modern equipment so they can compete with any economy in the world.
Real Change in Economic Incentives Does not Require Offsetting Tax Increases
It's important to remember that pushing for real change in our economy with an optional flat tax and a lower corporate income tax will be met with howls of derision. Some will complain that it will bust the budget. Others will insist that these changes be coupled with offsetting tax increases.
Both will be wrong. The unwillingness or inability of the bureaucrats at the Joint Tax Committee, Congressional Budget Office, and the Office of Management and Budget to foresee the growth caused by previous tax cuts is inexcusable. These same bureaucrats will surely once again underestimate the pro-growth effects and pro-tax revenue effects of fundamentally changing our tax system.
We must take this fight head on with two approaches. First, we must point out again and again how wrong government bureaucrats have been in the past about the pro-growth impact of positive changes to tax incentives.
Second, we must commit ourselves to reducing spending wherever we can. Those of us who support pro-growth tax reform must relentlessly challenge both Republicans and Democrats to eliminate current wasteful spending and to stop proposals for new spending that will prevent us from realizing the powerful long term benefits of fundamental tax reform.

Exactly Wrong Economy

In May of 2009, Congressman Gingrich wrote an article for his bog titled "Exactly Wrong Economy." In that article, he discusses the need to lower the business tax.

The U.S. Has the Second Highest Business Taxes in the World
Concentrating more power in Washington politicians and bureaucrats means government dictating what it deems are the “right” choices to individuals and businesses, rather than giving them the freedom and incentive to make their own choices.
For example, in his address to the joint session of Congress last week, the President announced his intention to punish “corporations that ship our jobs overseas.”
The United States imposes the second highest business taxes of any industrialized nation in the world. While countries like Ireland tax corporations at 12.5%, and even our neighbor Canada is moving its national business tax rate to 15% (the lowest among the G-7 countries), the United States taxes businesses at a whopping 35%. And a number of states have corporate income taxes on top of that.
Inevitably, high taxes in the U.S. cause some businesses to locate some or all of their business in lower tax countries overseas.
Don’t Punish Businesses for Locating Overseas. Encourage Businesses to Come to America to Create American Jobs
But if President Obama were serious about wanting to create jobs, he wouldn’t be thinking up ways to punish companies for wanting to relocate overseas.
If President Obama were serious about creating and keeping American jobs he would be thinking of ways to make companies want to bring their jobs and capital to America -- and keep them here.
Americans Solutions has created 12 American Solutions for Jobs and Prosperity. Our No. 3 recommendation for jobs and prosperity is for America to match Ireland’s 12.5% business tax.
That would do more than anything in the President’s budget to accomplish his often-repeated goal of “creating and saving” American jobs.

Opposition to Tax Increases

On January 22, 2009 Congressman Gingrich appeared on Fox News and spoke about his opposition to tax increases in balancing the budget.

Arguments for Ending the Capital Gains Tax

On August 13, 2009 Congressman Gingrich wrote an article in which he described the history of the capital gains tax, and then makes a series of arguments for ending the captal gains tax.

Capital Gains Tax: An Argument for Repeal
By Newt Gingrich and Emily Renwick
President Obama recognizes the powerful positive economic impact a capital gains tax cut would have for small business owners—so why not give it to every American family and business in order to encourage growth and success?
President Barack Obama’s budget for 2010 presented a number of tax cuts to spur economic growth. Most notably, his budget called for a reduction of the capital gains tax for small businesses. Apparently, President Obama recognizes the powerful, positive economic impact a capital gains tax cut would have for small business owners.
Since the cut would be good for small businesses, why would President Obama not give it to other businesses too? Businesses large and small across the United States are struggling in the current economy. Businesses large and small are cutting jobs because of unfavorable economic conditions made worse by burdensome government policies like the capital gains tax. President Obama should extend this pledge to eliminate the capital gains tax on small businesses to every American family and business in order to encourage economic growth and competitiveness.
The capital gains tax is an unequivocal burden on the capital we need to grow, prosper, and compete in a 21st century global economy. Any American or business that sees an appreciation of the value of their income (capital) must pay up to 39.6 percent in additional taxes on this appreciation (depending on the length of the investment and the marginal tax rate of the individual or business). Considering inflation, the effective rate paid on investments is even higher. As we are coming out of the recession, the United States should do everything within its power to create a financial environment that allows businesses to rapidly grow and prosper.
Part of our economic problem is that the United States has one of the highest tax rates on capital gains in the world. Many industrial countries have no taxes on capital gains including Austria, Belgium, Germany, Greece, Luxembourg, Mexico, New Zealand, Portugal, and Turkey. Countries that do not impose capital gains taxes on stocks include Argentina, China, Greece, Hong Kong, Israel, Malaysia, Mexico, the Netherlands, Pakistan, the Philippines, Poland, Singapore, Spain, Sri Lanka, Taiwan, and Thailand. In order to compete with economic growth in Shanghai, America must match China’s 0 percent capital gains rate.
Moreover, the actual revenue received from a capital gains tax is disproportionate to the burden imposed. The Congressional Budget Office (CBO) reports that in 1990 capital gains tax receipts totaled $32 billion, making up just 6.8 percent of total individual income tax receipts. By 2000, this number rose to $119 billion, making up 11.8 percent of the total. Notwithstanding the current economic meltdown, CBO estimates that for 2008, capital gains tax receipts will be close to $106 billion, making up 9.2 percent of the individual income tax receipts. While discouraging economic growth and driving investors across the Atlantic, receipts from the capital gains tax are barely making a dent in government revenue.
Given the current economic problems, we call on Congress to immediately eliminate the capital gains tax. In this article, we describe the historical and present-day impact that the capital gains tax has on federal revenue. We will then discuss the main benefits of zeroing the capital gains tax rate, including the positive influences upon economic growth and job creation, capital formation, and venture capital funding. Finally, we describe the immediate advantages a capital gains tax cut would have for the average American.
History of Capital Gains Tax Legislation
Originally capital gains were taxed as regular income at each individual taxpayer’s income tax bracket. In response to the higher income tax rates in World War I, legislators in 1922 introduced lower tax rates of 12.5 percent on capital gains on assets held for more than two years. This was to offset the reduction in capital gains revenue generation resulting from the higher capital gains tax rate. During the 1930s, legislation was passed to allow taxpayers to exclude percentages of their capital gains from being taxed. Specifically, “in 1934 and 1935, 20, 40, 60, and 70 percent of gains were excluded on assets held 1, 2, 5, and 10 years, respectively. Beginning in 1942, taxpayers could exclude 50 percent of capital gains on assets held at least six months or elect a 25 percent alternative tax rate if their ordinary tax rate exceeded 50 percent,” wrote Gerald Auten of the Urban Institute.
The capital gains tax was increased in the Tax Reform Acts of 1969 and 1976. In 1978, however, the tax rate was reduced to 28 percent. In 1981, more tax rate reductions lowered the rate to a maximum of 20 percent. The Tax Reform Act of 1986 raised the maximum capital gains tax rate back up to 28 percent by repealing the exclusion of long-term gains. Specifically, taxpayers were no longer allowed to exclude 50 percent of their capital gains on assets they had held for more than six months. The capital gains tax rate for the highest income brackets was cut to 20 percent as part of the Taxpayer Relief Act of 1997, which also exempted the sale of a personal residence of up to $250,000 for singles and $500,000 for married couples who filed jointly. The act created multiple tax rates based upon the type of capital asset and the length of holding time.
One year later, under the Republican majority, we introduced the Economic Growth Act of 1998, which would have further cut the capital gains tax to 15 percent. In arguing for this tax decrease, I said at the time, “the capital gains tax is in fact a tax on job creation . . . cutting the capital gains tax rate helps anyone who is preparing for retirement, starting a business, saving for college tuition, or planning to buy a house.”
The capital gains tax rate was once again lowered in 2003. Former President George W. Bush signed the Jobs and Growth Tax Relief Reconciliation Act of 2003, better known as the “Bush tax cuts.” In this act, Congress reduced the lowest level from 8 percent to 5 percent; and the highest level for an investment held more than one year from 20 percent to 15 percent. In 2008, the act removed the capital gains tax entirely for individuals in the lowest two income brackets. The Bush tax cuts must be renewed by 2011, otherwise the capital gains tax rate will once again go back to the pre-2003 rates of 20 percent and 10 percent on most capital gains, and 18 percent and 8 percent for property purchased in or after 2001 and held for more than five years.

Economic Arguments for Eliminating the Capital Gains Tax

Past efforts to decrease the capital gains tax rate have been influenced by convincing evidence that a cut would increase economic growth. The investor class is integral to a functioning economy and investors’ decisions are influenced by the tax system in which they operate. Likewise, assets are in part priced with the calculation that if the stock is sold, the investor will have to pay tax on realized capital gains. As a result, buyers, knowing that they have to pay taxes, reduce the price that they are willing to pay for assets, thus driving down stock prices.

With a capital gains tax cut, the value of the stocks will see an immediate boost. This increase in value is known as “the capitalization effect.” The capitalization effect then explains how a capital gains tax cut will increase the stockholders’ after-tax returns on traded assets. Leading economists, such as Douglas Shackelford, have found that the capitalization effect would set in almost immediately after a capital gains tax cut, meaning that prices for investments would rise as investors capitalize on the reduced tax rate.

Some analysts have suggested that the immediate increase in stock values would be offset by an economic principle known as the “lock-in effect.” This effect occurs when investors, recognizing that they have to pay taxes on their gains, will lock in and hold rather than sell their assets. After a capital gains tax cut, we could see a potential sell-off of stocks, increasing trading volumes and leading to a temporary fall in asset values. However, we have seen through market observances that the capitalization effect is likely to have a more permanent impact than the lock-in effect. In other words, the lasting impact of a capital gains tax cut is likely to be an increase in asset values.

Additionally, because investors have to pay a tax on their gains, they often are penalized for diversifying their investment portfolio with a wide range of investment products. The capital gains tax distorts what the investors’ pre-tax optimal allocation of assets would be, potentially creating more challenges in investment for Americans. Taxing investment gains clearly raises the opportunity cost of asset transactions, leading to various inefficient outcomes.

Given the capitalization and lock-in effects, the current tax regime is distorting the true value of assets. Of course, there may be other unknown factors that could influence the prices of stocks, but our research indicates that the overarching impact of a capital gains tax cut would be an increase in stock values.

Philosophical Arguments against the Capital Gains Tax

Proponents of the capital gains tax argue that the tax is another way for the government to obtain revenue. These advocates argue that any income gained from investments should be taxed the same way that wages and gross yearly income are taxed. The problem with this argument is that in most cases capital gains are not traditional income. And in effect, the income that will give rise to the capital gains will be taxed as income and so the capital gains tax is a second level of tax. In other words, a higher capital gains tax rate discourages saving and investment.

In fact, Americans who set aside a portion of their after-tax income for savings in investments are the main victims of a capital gains tax. Individuals may intend to draw on these gains to finance the purchase of a new home or automobile, to pay for college tuition, or to supplement their Social Security income during retirement.

As a result, many economists refer to the capital gains tax as a “double tax.” Economist Bruce Bartlett argues that this penalizes many stockholders:

The fact is that capital gains arise only in the case of an income-producing asset. The value of the asset is simply the discounted present value of the future flow of income associated with that asset (rent in the case of real estate, interest in the case of bonds, and corporate profits in the case of stocks). Thus, if the income stream (rent, interest, profits/dividends) is taxed, then any additional tax on the underlying asset (real estate, bonds, stocks) must necessarily constitute a double tax on the same income.

A double tax is a destructive and unfair way for the government to gain additional revenue. Moreover, in some cases, the capital gains tax unfairly taxes investment gains that may not be gains at all. The capital gains tax, as written, does not account for changes in the price level. The result of this is that an individual may be unfairly taxed on gains that merely reflect the rise in the general price level, or may even reflect a real loss of value on an investment. To illustrate, consider an example where an individual purchases property for $100 in 1950 and proceeds to sell it for $500 in 2000. Looking at this without any other factors, the government would tax the $400 profit at a rate of 15 percent. The problem is that in these 50 years, the investor actually lost money on this investment because the inflation rate over 50 years was much higher than the 400 percent increase in the value of the property. That is, the $100 in 1950 would have grown to $714.61 in 2000 due to inflation. Thus, we can see that the investor is penalized for investing by both losing real purchasing power and by being taxed due to a nominal increase in income. While taxing individuals at progressively higher rates for higher income is a controversial topic, this act of taxing people even when they have a real negative income from investment is clearly unfair.

Empirical Benefits of Eliminating a Capital Gains Tax

Beyond the theoretical justifications for cutting the capital gains tax, how much wealth would actually be added to the economy? The Treasury Department conducted a study examining the economic consequences if we preserved President Bush’s tax cuts by ensuring that capital gains were taxed at 15 percent. The Treasury’s study found that if we made Bush’s tax rate permanent on capital gains and dividends, we would see an increase of national income of 0.4 percent. If we went one step further and eliminated the capital gains tax, we could potentially see an increase in gross domestic product of twice that amount. Dustin Chambers of Salisbury University argues that the increase in stock prices would be profound, ranging from an increase of 9.2 percent to 20.5 percent.

The exact size of the increase in the return in investments is uncertain, since it is based on forecasts. What is certain, however, is that when the cost of investment falls, as it does with the elimination of the capital gains tax, the net return on investment will rise. Most importantly, the short-term and long-term wealth of the U.S. economy will unambiguously improve. As Former Federal Reserve Chairman Alan Greenspan once observed, if you want the highest economic growth rate the best capital gains tax rate is zero.

Conclusion

Since the collapse of the economy in the fall of 2008, policy officials have been looking for a quick way to jump-start the economy. If we were to immediately eliminate the capital gains tax we would see a drastic improvement in job creation and economic growth.

First and foremost, businesses would have more of an incentive to invest capital in all areas of their business, including labor, capital, and research and development. Moreover, businesses would be able to finance their debt at a lower cost if capital gains were not taxed. In today’s market, businesses seek out new stocks or bonds to finance their investments. Those assets will be more desirable if investors do not have to pay the capital gains tax on the revenue gained from the investment. As these corporate assets become more appealing, this will drive down the cost of capital for companies, facilitating investment by companies so that they can grow and hire more employees.

In addition to facilitating development for small businesses and corporations, a capital gains tax cut would also have a significant stimulative affect on venture capital funding. As Stephen Moore and Phil Kerpen contend:

Venture capital funds are the economic lifeblood of high-technology companies in industries that are of critical importance to the U.S. international competitiveness: computer software, biotechnology, computer engineering, electronics, aerospace, pharmaceuticals, and so forth. The high capital gains tax rate appears to have contributed to the drying up of funding sources for those promising new frontier firms.

Likewise, J.R. Johnson, an entrepreneur and the co-founder of virtualtourist.com, argued that Congress should encourage investment by the private sector through a decrease in the capital gains tax rate:

No longer standing around, testing the water by dipping a toe into the pool, entrepreneurs would be cannonballing into the deep end—rushing to create jobs before the exemption ends. This will build some of the companies that will carry us out of these difficult economic times. Rather than rely so heavily on government to spend our way out of this recession, let’s fully encourage people who create small businesses to do it for us.

Additionally, research points to an increase in corporate acquisitions, as a decrease in capital gains taxes leads to lower transaction cost, more attractive stock portfolios, and more appealing corporate investment packages for potential shareholders.

Given the budding economic growth, Congress should immediately pass legislation that eliminates the capital gains tax. While this legislation would have an insignificant impact on federal revenue, zeroing the capital gains tax would have an immediate and significant impact on renewing economic growth and spurring individual prosperity. Congress cannot afford to wait any longer to eliminate the tax. Our jobs and our economic prosperity depend on it.

5 Ways to Create Job

In May of 2010, Congressman Gingrich spoke at the Latino coalition and stated that he supported 5 tax cuts. These cuts were

50% reduction is social security and medicare taxes for both the employer and the employee
100% for all new equipment
make the capital gains tax rate 0%
make the corporate tax rate 12.5% (as in Ireland)
abolish the death tax (estate tax)

Palmetto Forum

In September of 2011, Speaker Gingrich participated in the Palmetto Forum in South Carolina that was hosted by Senator Jim DeMint. He outlines five points for his tax and economic plan. First, he would repeal Dodd-Frank. Second would be replacing the EPA with an environmental solutions agency. Third would be the repeal of Sarbanes-Oxley. Fourth would be a reform of the FDA. He then states that for taxes he would have no tax increase in 2013, 0 the capital gains rate, go to a 12.5% corporate tax rate, go to 100% expensing for farms and factories to compete with China, end the death tax permanently, and create an "American Energy Tax plan."

TEA Party Debate

In September of 2011, Congressman Gingrich participated in the TEA Party debate for the Republican primary. He spoke about current tax cuts and subsidies.

BLITZER: Thank you, Governor.
Speaker Gingrich, some of the biggest companies in the United States, the oil companies, they got -- I guess some would call government handouts in the form of tax breaks, tax exemptions, loopholes. They're making billions and billions of dollars. Is that fair?
GINGRICH: You know, I thought for a second, you were going to refer to General Electric, which has paid no taxes.
(APPLAUSE)
You know, I -- I was -- I was astonished the other night to have the president there in the joint session with the head of G.E. sitting up there and the president talking about taking care of loopholes. And I thought to myself, doesn't he realize that every green tax credit is a loophole...
(APPLAUSE)
... that everything he wants -- everything General Electric is doing is a loophole? Now, why did we get to breaks for ethanol, breaks for oil and gas, et cetera? We got to them because of this idea, which the young man just represented. If we make you -- if we make it possible for you to keep more of your own money, you will do more of it.
We have a simple choice. We can depend on Saudi Arabia, Iran, Iraq, Venezuela, or we can encourage development in the United States of manufacturing, as Rick said. We can encourage development of oil and gas. We can do it by saying we're going to let you keep more of your money if you create more of what we want. I'm for an energy- independent America, and that means I favor people who create energy.
(APPLAUSE)
BLITZER: But I just want to follow up, Mr. Speaker. If you eliminate some of those loopholes, those exemptions, whether for ExxonMobil or G.E. or some other companies, there are those who argue that is, in effect, a tax increase and it would violate a pledge that so many Republicans have made not to raise taxes.
GINGRICH: Yes, a lot of people argue that. They're -- they're technically right, which is why I'm -- look, I'm cheerfully opposed to raising taxes. This government -- we have a problem of overspending. We don't have a problem of undertaxing.
And I think that it would be good for us to say, we're not going to raise any -- which is why I'm also in favor of keeping the current tax cut for people who are working on Social Security and Medicare. I think trying to raise the tax on working Americans in the middle of the Obama depression is a destructive policy. So I don't want to have any tax increase at any level for anyone. I want to shrink government to fit income, not raise income to try to catch up with government.

Western Debate

In October of 2011, Congressman Gingrich participated in the Western Debate on CNN. He was asked about tax reform and specifically Herman Cain's proposal of 9-9-9. He states that he supports more specific tax cuts and reform.

Michigan Economic Debate

In November of 2011, Congressman Gingrich participated in the Michigan economic debate. He discussed his views on taxes and the need for lower regulation.

BARTIROMO: Speaker Gingrich, Federal Reserve Chairman Ben Bernanke has called unemployment in this country a national crisis due to the amount of days people are out -- months that people are out of work and the number of people out of work. Many of you have come up with tax reform plans. Why is tax reform the path to job creation? And if it's not the only path, what else can you implement to get people back to work?
GINGRICH: Well, first of all, I think Ben Bernanke is a large part of the problem and ought to be fired as rapidly as possible.
(APPLAUSE)
GINGRICH: I think the Federal Reserve ought to be audited and we should have all the decision documents for 2008, '09 and '10 so we can understand who he bailed out, why he bailed them out, who he did not bail out, and why he did not bail them out.
(APPLAUSE)
GINGRICH: So, I'm glad that Ben Bernanke recognizes some of the wreckage his policies have led to.
The reason we follow -- I think most of us are for tax policies that lead to jobs is because we have had two cycles in my lifetime, Ronald Reagan, and the Contract with America, both of which had the same policy: lower taxes, less regulation, more American energy, and have faith in the American job creator as distinct from the Saul Alinsky radicalism of higher taxes, bigger bureaucracy with more regulations, no American energy, as the president announced again today in his decision on offshore, and finally class warfare.
So I would say that all of us on the stage represent a dramatically greater likelihood of getting to a paycheck and leaving behind food stamps than does Barack Obama.

2012 Presidential Campaign Website Statements

JOBS & THE ECONOMY
"Creating jobs and getting back to 4% unemployment is the most important step to a balanced budget." -- Newt Gingrich
America only works when Americans are working. Newt has a pro-growth strategy similar to the proven policies used when he was Speaker to balance the budget, pay down the debt, and create jobs.
The Gingrich Prosperity Plan

Stop the 2013 tax increase to promote stability in the economy. Job creation moved from stagnant to improving in the two months after Congress extended tax relief for two years. We should continue what has worked by making the rates permanent.

Make the United States the most desirable location for new business investment through a bold series of tax cuts and regulatory reforms, including:rn

Eliminating the capital gains tax to make American entrepreneurs more competitive against those in other countries;

Dramatically reducing the corporate income tax (the highes in the world) to 12.5%;

Allowing for 100% expensing of new equipment to spur innovation and American manufacturing;

Ending the death tax permanently.

Repeal Sarbanes-Oxley to remove burdensome financial regulation that is holding companies back from taking risks and making new investments.

Implement an American energy policy that creates jobs in the United States versus the Obama plan which borrows money from China to give to Brazil to drill for oil and to then sell to Americans.

Enforce the fiscal responsibility Americans deserve by controlling spending, implementing money saving reforms, and replacing destructive policies and regulatory agencies with new approaches.

Repeal and replace Obamacare with a pro-jobs, pro-responsibility health plan that puts doctors and patients in charge of health decisions instead of bureaucrats.

The Gingrich Jobs and Growth Plan
America only works when Americans are working. Newt has a pro-growth strategy similar to the proven policies used when he was Speaker to balance the budget, pay down the debt, and create jobs. The plan includes:

Stop the 2013 tax increases to promote stability in the economy. Job creation improved after Congress extended tax relief for two years in December. We should make the rates permanent.

Make the United States the most desirable location for new business investment through a bold series of tax cuts, including: Eliminating the capital gains tax to make American entrepreneurs more competitive against those in other countries; Dramatically reducing the corporate income tax (among highest in the world) to 12.5%; Allowing for 100% expensing of new equipment to spur innovation and American manufacturing; Ending the death tax permanently.

Move toward an optional flat tax of 15% that would allow Americans the freedom to choose to file their taxes on a postcard, saving hundreds of billions in unnecessary costs each year. This optional flat tax system will preserve deductions on charitable giving and home ownership, and create a new personal deduction of $12,000 for every American. This deduction is well above the current poverty level, ensuring that this new system does not unfairly target the poor.

Strengthen the dollar by returning to the Reagan-era monetary policies that stopped runaway inflation and reforming the Federal Reserve to promote transparency.

Remove obstacles to job creation imposed by destructive and ineffective regulations, programs and bureaucracies. Steps include: Repealing the Sarbanes-Oxley Act, which did nothing to prevent the financial crisis and is holding companies back from making new investments in the U.S; Repealing the Community Reinvestment Act, the abuse of which helped cause the financial crisis; Repealing the Dodd-Frank Law which is killing small independent banks, crippling loans to small businesses and crippling home sales; Breaking up Fannie Mae and Freddie Mac, moving their smaller successors off government guarantees and into the free market; Replacing the Environmental Protection Agency with an Environmental Solutions Agency that works collaboratively with local government and industry to achieve better results; and Modernizing the Food and Drug Administration to get lifesaving medicines and technologies to patients faster.

Implement an American energy policy that removes obstacles to responsible energy development and creates jobs in the United States.

Balance the budget by growing the economy, controlling spending, implementing money saving reforms, and replacing destructive policies and regulatory agencies with new approaches.

Repeal and replace Obamacare with a pro-jobs, pro-responsibility health plan that puts doctors and patients in charge of health decisions instead of bureaucrats.

Fundamental reform of entitlement programs with the advice and help of the American people.