A2: ENTREPRENEURSHIP OVERVIEW

Jackson, Jason Wiens and Chris. “The Importance of Young Firms for Economic
Growth.”Kauffman.org,www.kauffman.org/what-we-do/resources/entrepreneurship-policy-
digest/the-importance-of-young-firms-for-economic-growth.

Policymakers often think of small business as the employment engine of the economy. But when it comes to job-creating power,
it is not the size of the business that matters as much as it is the age. New and young companies are the primary source of job
creation in the American economy. Not only that, but these firms also contribute to economic dynamism by injecting competition
into markets and spurring innovation.

Representing 95 percent of all U.S. companies, businesses with fewer than fifty employees are undoubtedly important to overall
economic strength. So too are the relatively few large companies that employ millions of Americans.

Yet, the startup news is not all good. The rate at which new businesses are opening has been steadily declining until 2014.
Because of their out-sized contributions, this decline has troubling implications for economic dynamism and growth if it is not
reversed.

New businesses account for nearly all net new job creation and almost 20 percent of gross job creation, whereas small
businesses do not have a significant impact on job growth when age is accounted for.

Companies less than one year old have created an average of 1.5 million jobs per year over the past three decades.

Many young firms exhibit an “up or out” dynamic, in which innovative and successful firms grow rapidly and become a
wellspring of job and economic growth, or quickly fail and exit the market, allowing capital to be put to more productive uses.

Young firms were hit hard during the Great Recession. Even still, from 2006 to 2009, young and small firms (fewer than five
years old and twenty employees) remained a positive source of net employment growth (8.6 percent), whereas older and larger
firms shed more jobs than they created.

Isenberg, Daniel. “Do Startups Really Create Lots of Good Jobs?” https://hbr.org/2016/06/do-
startups-really-create-lots-of-good-jobs.

Klein, Ezra. “A top venture capitalist thinks startups are causing inequality. He’s wrong.”
https://www.vox.com/2016/1/6/10722302/paul-graham-inequality

But Graham's focus on startups as a cause and consequence of inequality is also empirically
wrong. "Startups are almost entirely a product of this period [of inequality]," he writes, which is
simply not true. For all the Silicon Valley hype, the startup rate has actually been declining
as [income] inequality has been rising, with a near 40% decrease in firm startup rates.
There are two reasons why small firms are the biggest impact in today's first round.

The first is economy and jobs

According to Census data, new firms represented as much as 16 percent of all firms in
the late 1970s. By 2011, that share had declined to 8 percent. Not only are there fewer
new firms, but those startups that do exist are creating fewer jobs. The gross number of
jobs created by new firms fell by more than two million between 2005 and 2010.

This is critical because he concludes that these firms also contribute to economic
dynamism by injecting competition into markets and spurring innovation.

The second is income inequality

Harvard Business review finds empirically that as the rate of startups decline, income
inequality starts to increase. This is extremely critical because we show you a reduction
of startups in the status quo, and also show you how affirming solves this.
 A2: HOUSING OVERVIEW

First off, cleanliness

Christine Schanes. Homelessness Myth #1: “Get a Job!” Nov 17, 2011. Huffington Post
First, many homeless people are employed while some even have two jobs. Usually, these people sleep under some kind of shelter. They may
be living in a homeless shelter or transitional housing situation, on someone else’s couch or in someone’s garage. Since the foreclosure crisis,
many families have formed “tent cities” from which they work. Second, in
order to get a job, people must be clean and
they must wear clean clothing. Even at McDonald’s and other fast-food restaurants employees are
required to be clean. County, state and federal rules and regulations provide the standards by which fast-food restaurants
must abide for the health and safety of their patrons. Proper sanitation facilities are essential so that people and their clothing
can be clean and meet the most basic qualification for a job—cleanliness. Without access to toilets, showers and laundry facilities, how are
people to keep themselves and their clothing clean? There
are few public toilets, fewer public showers and even
fewer public laundry facilities available to homeless people. Toilets and showers are available to students of community
colleges, so some homeless people try to enroll in classes. Places like the YMCA have public toilets and showers, but day or membership fees
are required that most homeless people cannot afford.

Second, workforce discrimination

Sarah Golabek-Goldman. Homeless shouldn't face job discrimination just because they lack an
address. October 10 2016
Other surveys have reported similar results. Veterans in one study identified the requirement of a permanent address and employers’
distrust of people residing in temporary shelters as a considerable barrier to attaining self-sufficiency. The
National Coalition for
the Homeless reported in 2014 that 70.4% of homeless respondents felt that they had been
discriminated against by private businesses based on housing status. And these are more than mere
suspicions. “Once employers find out that a job applicant lives in a homeless shelter, so many have
told me that they can’t hire them,” said Glynn Coleman, an employment specialist at the Union Rescue Mission in Los Angeles.
“Several employers refuse to engage with our residents if they don’t have an address or reside on skid
row.” Employers of course deserve to know where their workers live, if only to find them in an emergency or conduct background checks.
But there’s no good reason for them to require an address on initial applications. Employers rarely send applicants paperwork or contact
them with an urgent matter before they hire them. Besides, employers almost always contact applicants through email

THIRD, EDUCATION
Mary Cunningham Graham MacDonald Urban Institute. Housing as a Platform for Improving
Education Outcomes among Low-Income Children. Housing as a Platform for Improving Education
Outcomes among Low-Income Children. 2012.

What does the research say about these hypotheses? Most research focuses on the absence of housing
and its negative consequences for children’s school outcomes. There are a few ways that inadequate
housing may affect school outcomes, as measured by accessibility to high-quality schools, attendance,
and academic achievement (i.e., school test scores).

First, researchers posit that children who experience homelessness or are living in overcrowded,
doubled-up situations may lack the necessary tools to do well in school (Dworsky 2008). For example,
overcrowded shelters may be noisy and chaotic, interfering with children’s ability to complete
homework assignments; [homeless] children may have to share common space and have inadequate
workspaces or access to school supplies.

[Second], [r]esidential instability may also lead to absenteeism and school changes.

[Third], [h]ealth problems related to housing quality may affect school attendance, putting children
behind in schoolwork and lowering academic achievement. The evidence shows that families living in
low-quality housing, particularly children, may suffer severe health consequences

The impact is long term success, education is NECCESARY to eliminating the poverty
cycle and creating an ability to move up the social ladder. IF we give housing, it
increases education for children allowing them success and solving the root issue. This
is a generational shift, we are solving for the next generation and giving them the
opportunity to succeed.

Academically, some studies have found that homeless and highly mobile students score lower than
stably housed children do on standardized tests in reading, spelling, and math (Obradovic et al. 2009;
Rafferty, Shinn, and Weitzman 2004; Rubin et al. 1996). These differences remain even after controlling
for poverty and other stressors. For example, Rubin and colleagues (1996) compared 102 homeless
children with 178 housed children and found, controlling for differences in socioeconomic status and
demographic characteristics, that homeless children scored lower on tests of reading, spelling, and
math proficiency.
 A2: INVESTMENT

LUCAS
Supply-Side Economics: An Analytical Review Author(s): Robert E. Lucas, Jr. Source: Oxford Economic
Papers, New Series, Vol. 42, No. 2 (Apr., 1990), pp. 293-316 Published by: Oxford University Press
effects of changes in the tax structure on capital accumulation. In a sense, the analysis I have reviewed supports
these claims: Under what I view as conservative assumptions, I estimated that eliminating capital income taxation
would increase capital stock by about 35 percent. Achieved over a ten year period, such an increase would more
than double the annual growth rate of the U.S. capital stock. Translated into an effect on welfare, this change is
much less dramatic, for two main reasons. First, diminishing returns to capital implies that a long-run capital
increase of 35 percent translates into a long-run consumption increase of something like 7 percent. Second, such
an enormous capital expansion requires a long period of severely reduced consumption before this long-run gain
can be enjoyed. Taking both these factors into account, I estimated the overall gain in welfare to be around one
percent of consumption, or perhaps slightly less

AT: LONG TERM

Capital Gains Tax: Revenue Has Risen After Rates Are Cut. Investor's Business DailyDecember 10, 2012

Capital gains tax rates were cut from 28% to 20% in 1981, again from 28% to 20% in 1997, and
from 20% to 15% in 2003. Capital gains tax revenues grew by an annual average of 15.8% from 1981-84, 17.8% from 1997-2000,
and 25.5% from 2003-06."One of the worst things you can tax is capital formation," said McBride. "When you increase the capital gains rate,
you increase the tax on using equities to finance investing. When the capital gains rate was reduced from 20% to 15% in 2003, capital gains
revenue grew about $2 billion from 2002. In 2004, when the 15% rate was in effect for a full year, capital gains revenue rose to $73 billion, a
nearly $22 billion increase from 2003. Capital
gains revenue continued to rise, peaking at $137 billion in 2007.
From 2003-07, the U.S. government collected about $155 billion more in capital gains revenue than
the Congressional Budget Office had predicted.

AT: MORE REVENUE

Dr. Paul D. Evans, The relationship between realized capital gains and their marginal rate of taxation,
1976-2004, Institute for Research into the Economics of Taxation, October 2009

Later analysis by Dr. Paul Evans in 2009 concluded that: “At current tax rates (15%), a 1 percentage
point reduction in the marginal tax rates on capital gains might trigger a 10.32 percent increase in
realized capital gains”.5 Actual experience showed the following, (as set out in the earlier ASI paper):6 •
Between 1968 and 1972 rates increased by 10 percentage points and revenues fell 21%. • In 1978 the
rate fell by 15 points from 35% to 20% and revenues increased by 46%. • In 1986 the rate was raised by
8 points to 28% and by 1991 15% less revenue was being raised. • In 1996 the rate was reduced by 8
points to 20% again and by 2000 revenues had grown by some 50% • In 2003 the rate was cut to 15%
and revenues grew by 45% over the following three years. This actual experience shows that as CGT
rates changed in a 20% band between 35% and 15% there was a close inverse relationship with
revenues. For every one percentage point increase or drop in the rates there was a significantly bigger
effect on revenues. Revenues increased more substantially from a decrease in the rates than they
decreased from an increase in rates. This is undoubtedly due to both the ‘lock-in effect’ whereby
higher rates result in people holding onto assets and selling them only when rates come down and the
higher levels of business and entrepreneurial activity that result from low rates

AT: SELF-FINANCE

Niels Veldhuis, Keith Godin, and Jason Clemens. The Economic Costs of Capital Gains Taxes. Number 4
/ February 2007. Fraser Institute

Mankiw and Weinzierl suggest that approximately 50% of the loss of revenue from a reduction in capital
income tax would be recovered though increased economic activity. While capital gains taxes are not
specifically modeled, Mankiw and Weinzierl do provide some evidence thatthe elimination ofthe tax
would be partially self-financing.
 A2: INCOME INEQUALITY

1) BUSH TAX CUTS DID NOT EFFECT GINI

Income Inequality went Up 12 Percent under Clinton, Zero under Bush January 20, 2012 William
McBride

In contrast, the period since 2000 has exhibited no underlying trend in income inequality, but rather
dramatic fluctuations resulting from the business cycle. The CRS is right to connect this to capital gains,
which have likewise cycled up and down, but wrong to conclude this represents an underlying trend.
Income inequality at the beginning and end of the Bush years was virtually unchanged, with the Gini
coefficient going from 0.555 in 2000 to 0.557 in 2008. In 2009 the Gini coefficient fell further, to 0.535,
for a 4 percent drop since 2000. There is therefore no evidence that the Bush tax cuts in either the top
marginal rate or capital gains rate had any long term effect on inequality.

2) LEVELING THE PLAYING FIELD

Chye-Ching Huang and Chuck Marr. CBPP. September 19, 2012

2 Taking advantage of these schemes involves spending resources (on, for instance, lawyer and
accountant fees) that people might put to more productive use. Burman has also commented: [Tax
s]helter investments are invariably lousy, unproductive ventures that would never exist but for tax
benefits. And money poured down these sinkholes isn’t available for more productive activities. What’s
more, the creative energy devoted to cooking up tax shelters could otherwise be channeled into
something productive. . . . Bottom line: low rates for capital gains are as likely to depress the economy
as to stimulate it. 3

3) First by giving unions more bargaining power. According to the Baltimore Sun, when major
tax cuts occur, unions have greater collective bargaining power to demand that this money be used for
increased wages because corporations undoubtedly have more money on their hands, which is critical
because the EPI 2017 writes that the real key to boosting wage growth for the American workers is
shifting bargaining power away from capital owners and to the workers

4) Second, by increasing job training. Ten studies by the EPI find that empirically corporate tax
cuts like abolishing the capital gains tax result in corporations upgrading their workers’ skills through job
training in order to increase productivity and company revenue.
5), by fostering more inner city investment. Porter of the Harvard Business Review
writes that abolishing the capital gains tax would be critical in order to speed up
private investment in upgrading infrastructure in inner city areas. Tanner 2003
corroborates that capital gains taxes cause those who are the furthest from the
sources of capital, inner city neighborhoods with ihg crimes rates and a poorly
educated workforce, suffer the most. Historically, when capital gains taxes fell,
investment seeks into these neighborhoods, increasing black owned businesses by
38%.
A2: INTEREST RATES
 A2: CEOS INCENTIVE

Chye-Ching Huang and Chuck Marr. CBPP. September 19, 2012

Some argue that a capital gains tax increase would impede new ventures from using stock options to
attract skilled executives. But the types of stock options that firms commonly offer executives are not
subject to capital gains tax
 A2: OPPORTUNITY ZONES

https://www.denverpost.com/2017/12/19/opportunity-zones-in-gop-tax-bill-ripe-for-abuse/
 A2: BUBBLE

1) RECESSION ALWAYS HAPPENS – CGT DOESN’T PREVENT IT

DIVISION OF THE HUMANITIES AND SOCIAL SCIENCES CALIFORNIA INSTITUTE OF TECHNOLOGY June
2002, ASSET BUBBLES AND RATIONALITY: ADDITIONAL EVIDENCE FROM CAPITAL GAINS TAX
EXPERIMENTS https://authors.library.caltech.edu/44370/1/wp1137.pdf

We find that the imposition of a capital gains tax fails to eliminate the possibility of a bubble.4 Two of
our three markets exhibited sustained transaction prices far in excess of fundamental values.
Furthermore, the observed measures of the magnitude of bubbles yield values typical of markets
without a capital gains tax. While we report behavior of only three markets, the data are sufficient to
establish the point. The possible existence of bubbles in the presence of the capital gains tax is clearly
established. We are in agreement with previous authors who have shown the bubble phenomenon to
be robust to changes in trading rules thought to discourage bubble formation. The presence of
bubbles and crashes and the high revenue generated by the tax in our data is consistent with the
conjecture of Lei et al.

(2001) that errors are an important factor in bubble formation.

2) LESS CGT TAKES US OUT BETTER

BRIAN RIEDL May 4, 2017. NATIONAL REVIEW. BENEFITS TO REAGAN TAX CUTS IGNORED.

Rather than push up interest rates and hurt the economy, the 1981 tax cuts cushioned the effects of the
Federal Reserve’s tightening and encouraged a supply-side surge that produced sustained economic
growth without increasing interest rates or inflation. When the deep recession finally ran its course in
late 1982, it was followed by a seven-year economic boom that saw the economy expand by 36 percent
and inflation-adjusted median family income rise by 12 percent, along with the creation of 19 million net
jobs (the equivalent of 25 million jobs in today’s larger working-age population). By comparison, in the
seven years following the 2007–09 recession, the economy expanded by just 16 percent, median
income rose by less than 3 percent (over six reported years), and only 11.6 million net jobs were
created. Had this recent “recovery” matched the Reagan recovery, the current GDP would be $3
trillion larger.

3) INTEREST RATES CAUSED RECESSION TO GET WORSE NOT CAP GAINS

Peter Ferrara. How the Government created a Financial Crisis. Forbes 2011

From early 2001 until late 2006, as White further explains, "the Fed pushed the actual federal funds rate below the estimated rate that would
have been consistent with targeting a 2% inflation." That estimated rate is determined by what is known in economics as the Taylor Rule. Steve
Forbes adds, "In 2004, the Federal Reserve made a fateful miscalculation. It thought the U.S. economy was much weaker than
it was and therefore pumped out excess liquidity and kept interest rates artificially low." White continues: The
demand bubble thus created went heavily into real estate. From mid-2003 to mid-2007, while the dollar volume of final sales of goods and
services was growing at 5 percent to 7 percent, real estate loans at commercial banks were growing at 10-17 percent.
Credit fueled
demand pushed up the sale prices of existing houses and encouraged the construction of new housing on
undeveloped land, in both cases absorbing the increased dollar volume of mortgages. Because real estate
is an especially long-lived asset, its market value is especially boosted by low interest rates.
A2: PUERTO RICO
A2: VOLATILITY
A2: OPP ZONES
 A2: RAISING DEBT

The Effects of the Capital Gains and Dividend Tax Cuts On the Economy and Revenues Four Years
Later, a Look at the Evidence REVISED JULY 12, 2007 BY AVIVA ARON-DINE

\The Joint Tax Committee projects that making the capital gains and dividend tax cuts
permanent would reduce revenues by about $30 billion a year, or about $25 billion a
year in 2006 terms. This amounts to about twice what the federal government spent
last year on Pell Grants to help low-income students attend college and more than
twice what it spent on the Environmental Protection Agency, the Head Start Program,
or the National Science Foundation.
A2: REVENUE SHORTFALL
A2: HOUSING CREDITS
A2: INCOME INEQUALITY

Steven Mufson and Jia Lynn Yang September 11, 2011

By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent
of the capital gains income realized in the United States has gone to 5 percent of the people; about
half of all the capital gains have gone to the wealthiest 0.1 percent. “The way you get rich in this world
is not by working hard,” said Marty Sullivan, an economist and a contributing editor to Tax Analysts. “It’s
by owning large amounts of assets and having those things appreciate in value.” Republicans have led
the way in pressing for low capital gains tax rates, but they have been able to rely on a significant bloc of
Democratic allies to prevent an increase and to protect the preferential treatment of money earned
through investments over money earned through labor.

AT: BUBBLE – MUST PROVE HOUSING INVESTMENT INCREASES

DANIEL INDIVIGLIO SEP 12, 2011. Does the Low Capital Gains Tax Harm the Poor? THE ATLANTIC

The housing bubble was not caused by excessive risk taking due to the low capital gains rate on
business investment: it was caused by overinvestment in housing. In fact, the housing market has far more favorable
tax treatment than business investment. Married couples selling a home are exempt from paying anycapital gains tax up to a $500,000 gain on
sale. They also benefit from the super-lucrative mortgage interest deduction. Finally, they do not need to pay taxes on the imputed income of
their home (the effective return they obtain by living in the home instead of paying for rent). That same luxury is not afforded to business
investors.

IT: WAPO QUALITIATIVE – MUFSON AND YANG

DANIEL INDIVIGLIO SEP 12, 2011. Does the Low Capital Gains Tax Harm the Poor? THE ATLANTIC

The article's implication that the capital gains tax is so low that it adversely affects poor people could
very well be true. Some economist could use data to prove that investment would shift by a statistically
insignificant amount if the tax was, say, 40% instead of 20%. But the WaPo article provides no such
evidence. Instead, it relies on the extremely weak, qualitative assertions of two EXPERTS.

AT: NOT VALUABLE FOR THE GOV

It’s the worst tax: Other countries are eliminating it and Canada should, too. Mathieu Bédard
November 3, 2017 9:25 AM EDT FINANCIAL TIMES
In one study, the federal Department of Finance found that each dollar reduced from taxes on capital
income would lead to economic gains of approximately $1.30, making it the tax whose elimination
would bring the most gains. On the flipside, the tax cannot be justified by the meagre revenues it
generates for government: approximately $4.3 billion, or just 1.5 per cent of total government revenues.

AT: THREE COUNTRIES PROVE ITS GOOD – SWITZERLAND, HK, NZ

It’s the worst tax: Other countries are eliminating it and Canada should, too. Mathieu Bédard
November 3, 2017 9:25 AM EDT FINANCIAL TIMES
One study looked at the case of Switzerland, where in addition to the central government, some
districts (or cantons) eliminated the capital gains tax. It found that elimination increased the size of
the economy by between one and three per cent. Another study, this one of Hong Kong, found that
thanks to the absence of a capital gains tax, the territory’s savings rate is well above that of similar
industrialized economies. In the case of New Zealand, the elimination of the capital gains tax was part
of the sweeping reforms that started in the 1980s and shifted from taxing capital and savings to taxing
consumption, which has less deleterious effects on economic growth. These reforms were important in
improving the economic situation of the country relative to its neighbours.

AT: 1997 WAS BENEFICIAL

Stephen Moore, Phil Kerpen. A Capital Gains Tax Cut: The Key to Economic Recovery. IPI. 2011

Michael Kinsley of Slate and others wrote that a capita gains cut would reduce federal revenues by $75
billion over five years. Instead, the rate cut is on pace to have raised capital gains revenues by $100
billion. What accounts for this giant forecasting error? The reliance on static revenue forecasting and
the failure to take account of the economic adrenaline that a capital gains tax cut can provide. The
lesson here is that the impact of tax changes cannot be properly predicted without assessing how the
tax policy changes will influence the behavior of workers, entrepreneurs and investors. All over the
world tax rates are falling as political leaders realize that high tax rates do not redistribute income, they
redistribute people. The static economic model used by the Joint Tax Committee and the Congressional
Budget Office should be discarded because it has proven again and again that it has no predictive
powers. The capital gains tax cut of 1997 corresponded with two other positive economic trends. First,
risk capital funding for new business start-ups increased by nearly 50 percent between 1997 and 2000.
If we want an investment-led recovery, then capital gains cuts are crucial. Here is the data for the
venture capital funding explosion after the capital gains cut:

A2: VOLATILITY
Jared Walczak. A Capital Gains Tax Would Be More Volatile than Washington State Revenue
Projections Suggest March 24, 2017. TAX FOUNDATION

Capital gains realizations soared 91 percent in the tax reform year of 1986, then plummeted 55
percent the next year. Realizations slid 71 percent between 2007 and 2009. Other sources of tax
revenue showed volatility in these years as well, but at nowhere near the intensity of capital gains.
Capital gains are taxed upon realization, meaning that you only owe the tax once you sell the asset. And
of course, capital gains are offset by capital losses. In some years, many more people will be cutting
their losses than taking their gains. Even in the depths of recession, most people are drawing paychecks,
and thus paying individual income taxes. They are making purchases subject to the sales tax. Assessed
property values may decline, but property taxes continue to flow. Capital gains are different. In a bad
year they all but vanish, making taxes on them remarkably unstable. Other states include capital gains in
their broader individual income tax base, but taxing only capital gains means accepting an enormous
amount of variance and unpredictability in revenue, which arguably makes a capital gains tax a poor
source of revenue for a priority like education.

A2: EQUALITY

Cato Institute Policy Analysis No. 242: The ABCs of the Capital Gains Tax October 4, 1995 Stephen
Moore, John Silvia

Historical experience suggests that when capital gains taxes fall, investment begins to seep back into
the areas most starved for investment. In Edge City, reporter Joel Garreau of the Washington Post
found that in contrast to the hightax-rate, high-inflation 1970s, when inner cities hemorrhaged capital,
in the 1980s' era of low capital gains taxes, "inner city business districts flourished." According to
Garreau, "In the 1980s, most American downtowns did as well or better than they ever had in any
decade of the twentieth century. This was true from Boston to Seattle to San Francisco to Los Angeles
to Atlanta to Washington to Philadelphia."[54] A report by the members of the U.S. Civil Rights
Commission found that after 1978, when the capital gains tax was reduced from 49 percent to 28
percent, "the number of black-owned businesses increased in a five-year period by one- third (to
308,000 from 231,200)."[55] After the tax rate was cut again, down to 20 percent, the number rose by
an additional 38 percent (to 424,000 by 1987). The commission noted that "expansion has slowed
significantly since the capital gains tax rate was raised from 20 to 28 percent in 1986."

A2: ENTREPRENEURSHIP

Niels Veldhuis, Keith Godin, and Jason Clemens. The Economic Costs of Capital Gains Taxes. Number 4
/ February 2007. Fraser Institute

Harvard economists Paul Gompers and Josh Lerner (1998) made an empirical examination of Poterba’s
argument by exploring the key drivers of venture capital funding. Analyzing the stock of venture capital
and tax rates on capital gainsfrom 1972 to 1994, Gompers and Lerner found that a one percentage-point
increase in the rate of capital gains tax was associated with a 3.8% reduction in venture capital funding.
[28] More recently, Christian Keuschnigg and Soren Bo Nielsen (2004a), writing in the Journal of Public
Economics, investigated the impact taxes and other public policies (i.e. subsidies to support new firms)
had on the creation and success of businessesthat were financed by venture capital. In their analysis, the
authors included the managerial effort and advice that venture capitalists provided to entrepreneurs in
addition to financing. Keuschnigg and Nielsen found that “even a small capital gains tax … diminishes
incentives to provide entrepreneurial effort” (2004a: 1033). More recently, Donald Bruce and
Mohammed Mohsin (2006) presented an empirical analysis of tax policy and entrepreneurship in the
United States. The authors examined personal income-tax rates, capital gainstaxes, and corporate
income-tax rates on self-employment rates (a proxy for entrepreneurship). [29] Bruce and Mohsin found
that a one percentage-point reduction in the capital-gains tax rate is associated with a 0.11 to 0.15
percentage-point increase in self-employment rates. Da Rin et al. (2006) examined the impact a number
of government policies had on new ventures (start-up businesses) in 14 European countries from 1988
to 2001. The authors used two measures to determine whether policies were successful: the proportion
of high-technology investments to total venture investments (high-tech ratio) and the proportion of
early-stage investments to total venture investments (early-stage ratio). The authors found that three
policies worked well to increase the proportion of high-tech and early-stage ventures: (1) opening a new
venture stock market, (2) reducing the capital gains tax and, (3) reducing labour regulation.

V.V. Chari Mikhail Golosov Aleh Tsyvinski. Business Start-ups, The Lock-in Effect, and Capital Gains
Taxation. Princeton University 2017.

In a benchmark economy where the capital gains tax is equal to 20%, only 10% of the entrepreneurs sell
businesses they just started, while the rest of the entrepreneurs manage businesses until they become
bankrupt. 19 When the capital gains tax is decreased to zero, the number of individuals specializing in
start ups increases to 29 percent.

A2: TAX EVASION

Niels Veldhuis, Keith Godin, and Jason Clemens. The Economic Costs of Capital Gains Taxes. Number 4
/ February 2007. Fraser Institute

He found that capital gains taxes have a significant impact on tax evasion: 30 Maja Klun (2004) provides
a review of the empirical literature of compliance costs associated with personal income tax in Canada.
In addition, Professor Brian Erard’s report (1997b) for the Technical Committee on Business Taxation
concluded thatthe compliance burden for income and capitaltaxesfor large companies in Canada
equalled roughly 5% of taxes paid. 31 Vaillancourt (1989) did not calculate administrative costs as a
percentage of gross revenues. This calculation was completed by the authors of this study. Revenues
from personal income taxes, CPP/QPP (Canada Pension Plan and Quebec Pension Plan), and UI
(Unemployment Insurance, now ‘EI’ or Employment Insurance) are from the National Economic
Accounts. Administrative costs are divided by revenues from these three sources to obtain the 1.0%
figure. The Fraser Institute / Studies in Entrepreneurship and Markets 4 20 / The Economic Costs of
Capital Gains Taxes a 1.0% decrease in the capital gainstax rate increasesthe reported tax base by 0.4%.
[32] In addition, he estimates that for a taxpayer with an income of $100,000 and capital gains of
$20,000, a reduction in the taxpayer’s tax rate from 45.0% to 33.0% (e.g. the United States’ Tax
Reform Act of 1986) would reduce the probability of the tax evasion from 72.0% to 55.0%

A2: CAN’T MAKE UP FOR IT

Niels Veldhuis, Keith Godin, and Jason Clemens. The Economic Costs of Capital Gains Taxes. Number 4
/ February 2007. Fraser Institute

One of the most widely cited calculations of MECs are those by Dale Jorgensen and KunYoung Yun
(1991). The authors estimate the MECs of select US taxes and find that capital-based taxes(such as
capital gainstaxes) impose significant costs on the economy. They concluded that capital income taxes
(dividend, interest, & capital gains) imposed a marginal cost of $0.92 (MEC) for one additional dollar
of revenue (table 2). In comparison, it costs the economy only $0.26 to raise an additional dollar of
revenue using consumption taxes.

A2: CGT DECREASES STOCK TRADING

Niels Veldhuis, Keith Godin, and Jason Clemens. The Economic Costs of Capital Gains Taxes. Number 4
/ February 2007. Fraser Institute

Numerous academic studies have investigated the lock-in effect. [17] For example, an influential paper
by Harvard Professor Martin Feldstein and his colleagues Joel Slemrod and Shlomo Yitzhaki (1980) was
one of the first to provide an empirical analysis of the effect of taxation on the realization of capital
gains(sale of corporate stocks at a profit). [18] The authorsfound thatthe realizing of capital gainsis very
sensitive to the marginaltax rate. They found a significant lock-in effect: a 10.0 percentage-point
increase in the marginal tax rate reduced the probability of selling a stock by 6.5 percentage points.
[19] [20] Paul Bolster, Lawrence Lindsey, and Andrew Mitrusi (1989) evaluated the impact of the
elimination in 1986 of the lower, long-term tax rate on capital gains on stock market activity in the
United States. [21] The authors examined trading volume on the New York Stock Exchange (NYSE) and
the American Stock andOptions Exchange (AMEX) from 1976 to 1987. They found that trading volume
significantly increased in the monthsleading up to the tax change and that trading volume significantly
declined after the tax change: trading volume was 15.0% lower in the January of1987 compared to
previousJanuaries. The empiricalresultssuggestthatthe expected increase in the capital-gains tax rate
induced investors to reallocate capital prior to the change.

A2: SELF FINANCED FOR

Niels Veldhuis, Keith Godin, and Jason Clemens. The Economic Costs of Capital Gains Taxes. Number 4
/ February 2007. Fraser Institute

Mankiw and Weinzierl suggest that approximately 50% of the loss of revenue from a reduction in capital
income tax would be recovered though increased economic activity. While capital gains taxes are not
specifically modeled, Mankiw and Weinzierl do provide some evidence thatthe elimination ofthe tax
would be partially self-financing.

A2: EQUALITY

Capital Gains Tax Cuts ‘By Far’ The Biggest Contributor To Growth In Income Inequality,
Study Finds.TRAVIS WALDRON. FEB 20, 2013. THINK PROGRESS

Hungerford’s findings are similar to a study he produced for the Congressional Research Service in
2011, which found that while income grew 25 percent from 1996 to 2006 for all Americans, it grew 74
percent for the top 1 percent and 96 percent for the top 0.1 percent. That study also found that tax cuts
on capital gains were the biggest driver of the disparity.

A2: NOT SELF-FINANCED

CBPP 08. Tax Cuts: Myths and Realities

Some argue that, even if most tax cuts do not pay for themselves, capital gains tax cuts do. But, in
reality, capital gains tax cuts cost money as well. After reviewing numerous studies of how investors
respond to capital gains tax cuts, the Congressional Budget Office concluded that “the best estimates of
taxpayers’ response to changes in the capital gains rate do not suggest a large revenue increase from
additional realizations of capital gains — and certainly not an increase large enough to offset the losses
from a lower rate.” That’s why CBO, the Joint Committee on Taxation, and the White House Office of
Management and Budget all project that making the 2003 capital gains tax cut permanent would cost
about $100 billion over the next ten years.

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