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The Impact of Capital Gains Taxation
on U.S. Investment and Economic Growth
American Council for Capital Formation
February 15, 1995
Introduction
ACCF President Mark Bloomfield, accompanied by ACCF Chief Economist Dr.
Margo Thorning, testified on February 15, 1995 as an invited witness at
a Senate Finance Committee hearing that examined the impact of capital
gains taxation on U.S. investment and economic growth. The executive summary
and full text of the ACCF's testimony are presented here.
Executive Summary
1. Overview. We commend the emphasis that Chairman Packwood places
on the impact of capital gains taxation on the cost of capital, saving
and investment, and economic growth. A capital gains tax cut will, if
enacted, help reduce the burdens on capital formation imposed by current
U.S. tax policy. It is clear that U.S. tax policies toward saving and
investment must be revised if we are to increase real wages for U.S. workers
and retain our leading role in world affairs.
2. Trends in U.S. Capital Formation. Recent U.S. saving
rates and investment spending compare unfavorably with those of other
nations as well as with our own past experience. The U.S. saving rate
averaged 4.8 percent over the 1973-1991 period, compared to 19.1 percent
in Japan and 10.7 percent in West Germany. During the same period, gross
residential investment as a percent of GDP was lower for the United States
than for any of our major competitors.
3. Tax Policy and Economic Growth. To those who favor
a truly level playing field over time for individual and business decisions
to save and invest, stimulate economic growth, and create new and better
jobs, capital gains (and other forms of saving) should not be taxed at
all. This view was held by top economists in the past and is held by many
mainstream economists today. A number of studies show that U.S. economic
growth would be enhanced if we relied more on consumption taxes or replaced
the income tax with a fundamental tax restructuring plan such as those
proposed by several prominent members of Congress.
4. Economic Case for Low Capital Gains Taxes. The economic
case for low capital gains taxes rests on the beneficial impact of such
a change on capital costs, capital mobility, entrepreneurship, and the
ravages of inflation. One recent study shows that a substantial reduction
in capital gains taxes, when macroeconomic "feedback" effects
as well as "unlocking" of unrealized gains are included, would
result in new and better jobs and lower capital costs, as well as increased
capital formation, stronger economic growth, and higher federal tax revenues
than under current law.
5. Taxation of Capital in Other Developed Countries. The
United States taxes individual and corporate capital gains more harshly
than most other industrialized countries. A survey of twelve industrialized
countries showed that the U.S. capital gains tax rate on long-term gains
on portfolio securities exceeded that of all countries except Australia
and the United Kingdom and even these countries index the cost basis of
an asset.
6. Capital Gains Rate Reductions and Tax Revenues. Capital
gain revenue estimates involve three elements: the "static"
revenue loss, the "unlocking" effect, and the "macroeconomic"
impact. A National Bureau of Economic Research study in the late 1980s
found the capital gains revenue maximizing rate to be in the range of
9 to 21 percent-the point at which there is sufficient "unlocking"
because of a lower tax to compensate for the static revenue loss because
of a lower tax rate. This maximizing rate does not account for the additional
revenue stemming from the positive macroeconomic impact of increased investment,
GDP, and employment that would result from a significant reduction in
the capital gains tax. A new study by nationally renown economist Dr.
Allen Sinai demonstrates this significant macroeconomic effect and the
resulting additional federal revenues.
Finally, the historical experience of actual capital gains tax receipts
during periods of low taxes (1978-1985) and high taxes (1987 to the present)
strongly suggest that a reduction in the current capital gains tax would
have a positive impact on federal revenues.
7. Conclusion. The hard fact is that we can no longer
afford the luxury of government economic policies that reward consumption,
discourage saving and investment, overregulate American business, and
penalize economic growth. Enactment of capital gains tax reform would
help move the United States toward a tax system that is more neutral toward
saving and investment and pave the way for more fundamental tax restructuring.
ACCF Statement
Introduction
My name is Mark A. Bloomfield. I am president of the American Council
for Capital Formation (ACCF). I am accompanied by Dr. Margo Thorning,
our chief economist. The ACCF represents a broad cross section of the
American business community, including the manufacturing and investment
sectors, Fortune 500 companies and smaller firms, individuals, and associations.
Our board of directors includes cabinet members of prior Republican and
Democratic administrations, former members of Congress, prominent business
leaders, and public finance experts. We appreciate this opportunity to
present testimony on the impact of a capital gains tax reduction on U.S.
investment and economic growth. In addition, I will share the results
of an international comparison of capital gains tax rates and discuss
the revenue maximizing capital gains tax rate.
To encourage a constructive debate on the taxation of capital gains this
year, our affiliated public policy think tank, the ACCF Center for Policy
Research, has prepared a special report for today's hearing, Questions
and Answers on Capital Gains, which is attached to our testimony.
We commend the emphasis that Chairman Packwood places on the impact of
capital gains taxation on the cost of capital, saving and investment,
and economic growth. A capital gains tax cut will, if enacted, help reduce
the burdens on capital formation imposed by current U.S. tax policy. It
is clear that U.S. tax policies toward saving and investment must be revised
if we are to increase real wages for U.S. workers and retain our leading
role in world affairs.
Trends in U.S. Capital Formation, Productivity Increases, and
Economic Growth
Investment spending in the United States in recent years compares unfavorably
with that of other nations as well as our own past experience. From 1973
to 1991, gross nonresidential investment as a percent of Gross Domestic
Product (GDP) was lower for the United States than for any of our major
competitors (see Table 1). The U.S. saving rate averaged 4.8 percent over
the 1973-1991 period, compared to 19.1 percent in Japan and 10.7 percent
in West Germany. Even more disturbing is the fact that net annual business
investment in this country has in recent years fallen to only half the
level of the 1960s and 1970s. Net private domestic investment averaged
7.4 percent of GDP from 1960 to 1980; since 1991 it has averaged only
3.0 percent (see Table 2).
Reflecting the reduced share of GDP being invested each year, the U.S.
capital stock has also grown more slowly. In the three decades prior to
1980, the total capital stock grew at 4.0 percent per year; in the 1980s
and 1990s, the rate fell to 2.7 and 1.4 percent respectively (see Table
3). The stock of equipment, which many experts regard as critical for
strong productivity growth, has increased only about half as fast since
1980 as in previous decades. Industrial equipment stocks, which grew at
an average rate of 4.3 percent over the 1950-1979 period, increased by
just 1.2 percent annually in the 1980s and 0.1 percent since 1990.
Link Between Investment, Productivity Increases, and Economic Growth
The importance of investment in plant and equipment for economic growth
is emphasized in a new book by Harvard Professor Dale Jorgenson. Professor
Jorgenson's book, Productivity: Postwar U.S. Economic Growth, analyzed
economic growth between cyclical peaks in the business cycle over the
1948-1979 period. Allocating increases in output to three sources-growth
in the capital stock labor, supply, and multifactor productivity-Professor
Jorgenson found that increases in the capital stock contribute most to
increases in output (see Figure 1).1
Investment's key role in advancing technological progress and productivity
growth is also stressed in recent research by New York University Professor
Edward N. Wolff.2 He argued that U.S. labor productivity growth
rates are depressed by the recent slower growth in the capital-to-labor
ratio-from a peak of 2.0 percent per year in the 1950s to 1.2 percent
per year in the 1972-1992 period. He emphasized that the effects of the
decline in U.S. capital-labor growth are perhaps even more pernicious
than they appear at first glance.
Thus, a slowdown in capital formation may doubly hurt labor productivity
growth-directly by slowing down the rate of capital deepening, and indirectly
by slowing down the rate of technological advance. Professor Wolff's research
also shows that U.S. labor productivity growth lags behind our competitors;
OECD countries outstripped the United States during much of the 1950-1990
period. He noted that countries such as Japan and Germany, which experienced
strong productivity growth in the 1970s and 1980s, showed significant
gains in their capital-to-labor ratios. Our competitors' gains in capital-to-labor
ratios are a direct result of their higher levels of investment.
Implications of Lagging Investment and Slow Growth in Labor Productivity
for Current and Future Living Standards
Real family income in the United States has been nearly stagnant since
the mid-1970s and in recent years has actually fallen. For example, real
median household income was $39,869 in 1989; income has declined in each
subsequent year, and in 1993 stood at $36,959. These trends have not only
made it harder to maintain living standards but have also jeopardized
our future economic health and our ability to remain the principal leader
in international affairs.
In addition, looming in the future is the need to finance the retirement
of the baby boom generation. Research by Stanford Professor B. Douglas
Bernheim, commissioned by the ACCF Center for Policy Research, our public
policy think tank, shows that current saving by members of the baby boom
generation is seriously inadequate.3 The typical baby boom
household saves at only one-third the rate required to finance a retirement
standard of living comparable to that enjoyed before retirement.
Tax Policy and Economic Growth
To those who favor a truly level playing field over time for individual
and business decisions to save and invest, stimulate economic growth,
and create new and better jobs, capital gains (and other forms of saving)
should not be taxed at all. This view was held by top economists in the
past and is held by many mainstream economists today.
This is primarily because the income tax hits saving more than once-first
when income is earned and again when interest and dividends on the investment
financed by saving are received, or when capital gains from the investment
are realized. The playing field is tilted because the individual or company
that saves and invests pays more taxes over time than if all income were
consumed and no saving took place. Taxes on income that is saved raise
the capital cost of new productive investment for both individuals and
corporations, thus dampening such investment. As a result, future growth
in output and living standards is impaired.
A consumption-based tax system, under which all saving and investment
would be exempt from tax, would be more favorable toward capital formation
and economic growth than is our current income tax system, according to
analyses by top public finance scholars over the past decade and a half.
Studies by Stanford University's John Shoven and Lawrence Goulder; Harvard
University's Dale Jorgenson; the University of Texas' Don Fullerton; and
Joel Prakken of Laurence H. Meyer have used macroeconomic models that
incorporate "feedback" and dynamic effects in simulating the
effect of adopting a consumption tax as a full or partial replacement
for the income tax. These studies, which use different types of general
equilibrium models, all come to the conclusion that U.S. economic growth
would be enhanced if we relied more on consumption taxes or replaced the
income tax with a fundamental tax restructuring plan similar to those
proposed by several prominent members of the U.S. Senate and House of
Representatives.
The Economic Case for Low Capital Gains Taxes
Low capital gains taxes not only treat savers more fairly but also help
hold down capital costs. Public finance economists refer to the tax on
capital gains as a tax on retained income, which funds a large part of
business investment. The higher the capital gains tax, the more difficult
it is for management to retain earnings (rather than pay out dividends)
for real investment in productive projects.
Although the economy is expanding, worries about the future appear to
be multiplying. A cut in the capital gains tax to a top marginal rate
of, say, 15 to 20 percent would by no means act as an economic panacea.
However, it would surely give a boost to values of capital assets (e.g.,
real estate and the stock market), encourage investment by both mature
and new businesses, and constitute fairer taxation of peoples' savings.
A new study by Allen Sinai, chief global economist at Lehman Brothers
and highly respected economic forecaster, shows that a substantial reduction
in capital gains taxes would, when macroeconomic "feedback"
effects as well as unlocking of unrealized capital gains are included,
result in new and better jobs, as well as increased capital formation,
stronger economic growth, and federal tax revenues that are larger than
under current law.
According to Dr. Sinai's study, a 50 percent capital gains exclusion,
combined with prospective indexing for all taxpayers (individual and corporate)
would, by the year 1999, increase real GNP by 2.3 percent, or about 0.5
percent per year compared to a baseline (see Table 4). In addition, the
capital gains tax reduction would increase capital spending and capital
formation, increase household net worth (household wealth), lower the
cost of capital for business and increase business profits, increase employment
and lower the unemployment rate, shift the financing of business activity
away from debt to equity, and induce portfolio allocations by households
toward equity to take account of changes in expected after-tax returns
on stocks and bonds.
The economic case for a low capital gains rests on the beneficial impact
on capital costs, capital mobility, the ravages of inflation, and entrepreneurship.
Capital Gains and Capital Costs
The user cost of capital is the pretax return on a new investment that
is required to cover the purchase price of the asset, the market rate
of interest, inflation, risk, economic depreciation, and taxes. This capital
cost concept is often called the "hurdle rate" because it measures
the return an investment must yield before a firm will be willing to start
a new capital project.
Economists are in broad agreement that capital costs are affected by tax
policy. For example, Stanford Dean John B. Shoven estimated that about
one-third of the cost of capital is due to taxes. In other words, hurdle
rates are 50 percent higher than they would otherwise be due to the tax
liability on the income produced by the investment. Thus, the higher the
tax on new investment, the less the investment that will take place. Although
the Tax Reform Act of 1986 (TRA) substantially reduced corporate and individual
income tax rates, the legislation's capital cost recovery provisions raised
effective tax rates and capital costs for productive and pollution-control
assets. Capital costs increased because of increases in capital gains
taxes, the loss of the investment tax credit, lengthening of depreciable
lives for many assets, and the creation of the corporate alternative minimum
tax.
Low capital gains taxes help hold down capital costs. Research by public
finance economists refer to the tax on capital gains as a tax on retained
income, which funds a large part of business investment. The higher the
capital gains tax, the more difficult it is for management to retain earnings
(rather than pay out dividends) to fund real investment in productive
projects. Research by Stanford Dean John Shoven, Ohio State Professor
Patric Hendershott, and Dr. Allen Sinai, indicates that a cut in the capital
gains tax rate to a range of 15 to 20 percent would reduce the cost of
capital by 4 to 8 percent.
Capital Gains and Capital Mobility
High capital gains taxes reduce the mobility of capital-and thus economic
efficiency-by keeping capital from flowing into its most productive uses.
The "lock-in" effect was demonstrated in a recent Tax
Notes article (December 26, 1994) by attorney Mark Greenstein.
Greenstein explains how high capital gains taxes "lock-in" investors
through the example below:
Amy has a building that cost $50,000, is worth $1,000,000, and yields
$70,000 in rent net of expenses. If Amy lives in a high-tax state, such
as New York, more than one-third of the value of the building would disappear
in taxes on disposition. To obtain the $70,000 she was receiving, Amy
would have to obtain a yield of over 10 percent on the roughly $650,000
she would receive, net of taxes, if she sold the building. Because of
this disincentive, it is likely that Amy will never sell her building.
Instead, she will simply leave it to her heirs and, under current law,
the gain will never be subject to an income tax.
Greenstein's example makes clear that if capital gains taxes were substantially
reduced, Amy would be more likely to sell the building because any subsequent
acquisition would not have to yield anything close to 10 percent to produce
the $70,000 in income she earned on her original building. The example
given above is also appropriate for investments in equities.
Capital Gains and Inflation
Opponents of capital gains tax reductions fail to recognize that capital
gains investments are inherently high risk and that realized capital gains
include purely inflationary gains that are not income. The willingness
to invest is hindered by taxing capital gains, which are phantom earnings
brought on by inflation. The combined effect of taxing inflationary gains
and limiting the deductibility of capital losses leads to a severe over-taxation
of many investments that will earn capital gains.
A study by National Bureau of Economic Research chairman Martin Feldstein
and University of Michigan Professor Joel Slemrod documents the overtaxation
of capital gains due to inflation. They found that in 1973 individuals
paid capital gains taxes on more than $4.5 billion of nominal gains on
corporate stock. Their finding provides evidence that capital gains taxation
is distortionary and unfair. If the cost of these shares had been adjusted
for inflation, the $4.5 billion nominal gain would be a real capital loss
of nearly $1 billion. In other words, individuals paid a substantial capital
gains tax even though, after inflation, they received less from their
sale than they originally paid.
The distortion, it should be pointed out, was greatest for middle-class
investors. That obviously makes little economic sense and is unfair.
Capital Gains and Entrepreneurship
Capital gains taxation has a particularly powerful impact on the entrepreneurial
segment of the U.S. economy-a reality that econometric models do not capture-making
possible new technological breakthroughs, new start-up companies, and
new jobs.
A few words about the entire entrepreneurial process are pertinent. A
number of factors are involved including entrepreneurs, informal investors,
venture capital pools, and a healthy public market. All, I should stress,
are sensitive to after-tax rates of return, which is why the level of
capital gains taxation is important.
Foremost is the entrepreneur. By taxing his potential capital gains at
a higher rate, either the pool of qualified entrepreneurs will decline
or investors will have to accept a lower rate of return. In either case,
the implications for the U.S. economy are clearly negative. To be successful,
the entrepreneur, of course, needs capital. Fledgling start-ups depend
heavily on equity finance from family, friends, and other informal sources.
Professors John Freear and William Wetzel of the University of New Hampshire,
in a survey of 284 new companies, found taxable individuals to be the
major source of funds for those raising $500,000 or less at a time.4
The point to be stressed is that individuals providing start-up capital
for these new companies pay capital gains taxes and are, therefore, sensitive
to the capital gains tax rate.
The Taxation of Capital in Other Developed Countries
Capital Gains
The United States taxes capital gains much more harshly than does the
rest of the world. In a survey of twelve industrialized countries undertaken
by the American Council for Capital Formation, the U.S. capital gains
tax rate on long-term gains on portfolio securities was found to exceed
that of all countries except Australia and the United Kingdom, and even
these two countries index the cost basis of an asset. Germany, Japan,
and South Korea exempt or tax only lightly capital gains from portfolio
stock (see Table 5). The U.S. corporate capital gains tax rate is at an
historic high and it is not competitive with many other countries.
Do they know something we don't know? Perhaps, yes. They recognize the
contribution a capital gains tax differential can make to lower capital
costs, mitigate the distortions of inflation, increase capital mobility,
nurture entrepreneurship, and stimulate new business creation.
While it is difficult to prove that low (or no) taxes on capital gains
cause higher rates of saving and investment, the circumstantial evidence
is compelling. Personal saving rates tend to be higher in countries with
low or no tax on capital gains on portfolio securities (see Table 5),
and investment is also higher (see Table 1). For example, Japan taxes
long-term capital gains on securities lightly; Japan's personal saving
rate as a percent of GDP averaged 11.9 percent over the 1973-1991 period
and nonresidential fixed investment averaged 24.1 percent. The comparable
saving rate for the United States is 5.9 percent; and U.S. investment
averaged only 13.9 percent.
Other Capital Income and Investment
The U.S. tax on capital gains should also be evaluated in the broader
context of the taxation of all capital income. On that score, the United
States also fares poorly. Many industrialized countries (see Table 5)
tax other capital income less harshly than does the United States. Most
provide for the integration of corporate and individual taxes, and many
tax interest income at lower rates than the United States.
In addition to having lower taxes on capital income than does the United
States, many other industrialized countries tax new investment more favorably
than we do. A new study by Harvard's Dale Jorgenson found that in 1990,
the marginal effective corporate tax rate on investment in equipment was
18.5 percent in the United States compared 11.5 percent in Germany, 8.8
percent in Japan, and 8.0 percent in the United Kingdom.5 Thus,
tax differentials may help explain why U.S. investment as a percent of
GDP lags behind that of our competitors.
Consumption Taxes
Finally, an international comparison needs to address the more fundamental
issue of the overall taxation of saving and investment. This is extremely
important because the level of a country's saving and investment is a
major factor in determining its economic growth. The evidence is clear
that almost all of our international competitors rely to a much greater
extent on consumption taxes to fund government expenditures than does
the United States. On average, the OECD countries collect 30 percent of
their tax revenues from consumption taxes such as the value-added tax,
compared to only 15 percent from consumption taxes in the United States.
Capital Gains Rate Reductions and Tax Revenues
Capital gains revenue estimates involve three elements. First, there is
"static" revenue loss stemming from taxing realizations at lower
rates. Second, there is the "unlocking" effect peculiar to capital
gains because it is a voluntary tax. Taxpayers tend to be locked in if
the rate is too high and will unlock if the rate is lower, thereby generating
tax revenues. Third, there is the macroeconomic effect of additional revenue
generated by the impact of lower capital gains on capital costs, saving
and investment, and economic growth. The challenge to this Committee is
to evaluate all three dimensions and the net impact on total revenues
to the U.S. Treasury.
Critics of a low capital gains tax argue that such cuts will result in
significant federal revenue losses, and thus add to the budget deficit,
absorb national saving, and raise interest rates and capital costs. Both
economic analysis and experience effectively refute this view.
Is There a Revenue-Maximizing Rate?
In the late 1980s, experts at the prestigious National Bureau of Economic
Research examined the question of the revenue maximizing capital gains
tax rate or, at what point is there sufficient "unlocking" to
compensate for the "static" revenue loss resulting from a reduction
in rates. The study by former Harvard Professor Lawrence Lindsay (now
a member of the Board of Governors of The Federal Reserve), which was
based on academic models of the responsiveness of taxpayers to changes
in the capital gains tax rates, found that the revenue maximizing rate
ranged between 9 and 21 percent.6 The NBER study does not take
into account the additional revenue stemming from the positive macro consequences
of increased employment and growth, which result from a significant reduction
in capital gains tax rates.
Subsequently, Professor Lindsay modeled the revenue impact of a 15 percent
capital gains tax. He chose that rate because it fell in the middle of
the revenue maximizing range of 9 to 21 percent. Professor Lindsay concluded
that a 15 percent capital gains rate would have substantially increased
capital gains revenues. Again, it needs to be emphasized that this analysis
does not include the revenue impact of a stronger economy.
Historical Experience
Experience indicates that lower capital gains taxes have a positive impact
on federal revenues. The most impressive evidence involves the period
from 1978 to 1985. During those years the marginal federal tax rate on
capital gains was cut from almost 50 percent to 20 percent-but total individual
capital gains tax receipts increased from $9.1 billion to $26.5 billion.
After surging to $326 billion in 1986 (the year before the rate increases
in the Tax Reform Act of 1986 took effect), capital gains realizations
have trended down and have remained at less than $130 billion per year
in the 1990s. Taxes paid are averaging only $27 billion per year. Given
the increases in the stock market, inflation, and growth in GDP since
the late 1980s, realizations and taxes paid are almost certainly being
depressed by the current high capital gains rates.
Unlocking and Macroeconomic Impact on Revenue
Scholars have researched two elements affecting capital gains tax revenues,
the "unlocking" of unrealized gains and the macroeconomic impact
of a low tax on capital gains. Estimates of unlocking are extremely sensitive
to assumptions of the elasticity of taxpayer response. Very minor differences
in assumptions can result in large differences in revenues. There is a
wide range of credible assumptions about elasticity. The important point
is that all the studies recognize a significant unlocking effect. For
example, Princeton Professor David Bradford noted that the revenue estimates
of President Bush's 30 percent capital gains exclusion resulted in a "static"
loss over 1990-1995 of $100 billion, according to the Joint Committee
on Taxation (JCT) and the Department of the Treasury. However, induced
realizations-the "unlocking" effect-and depreciation recapture
would have recouped almost 90 percent of the loss, according to the JCT,
and 110 percent as estimated by the Treasury. This arithmetic accounts
for only one behavioral response-the "unlocking" effect-and
the Treasury recoups almost all of the revenue loss.
Government revenue estimates do not factor in the macroeconomic consequences
of lower capital gains tax rates on U.S. capital costs, investment, economic
growth, and overall tax revenues. However, Dr. Allen Sinai's new analysis
(cited earlier) shows significant increases in GDP, employment, and investment
as well as a positive impact on federal tax revenues as a result of substantial
capital gains reductions.
Long-Run Strategies for Tax Reform
While capital gains taxes should be lowered or eliminated immediately
to help encourage U.S. saving and investment, policymakers should have
comprehensive tax reform as their long-term goal.
Restructuring the U.S. federal tax system to reduce the multiple taxation
of saving and investment inherent in the income tax-and thus to promote
productivity and higher living standards-should be high on the agenda
of the 104th Congress. Several congressional tax reform proposals have
been introduced or are close to being introduced as legislation.
Under the major taxation restructuring proposals before Congress, income
in the form of capital gains is not taxed at all or only taxed if the
proceeds are consumed. A common theme of the congressional tax reform
proposals is that saving and investment are taxed more lightly and consumption
more heavily than under current law.
Conclusion
The hard fact is that we can no longer afford the luxury of government
economic policies that reward consumption, discourage saving and investment,
overregulate American business, and penalize economic growth. Enactment
of capital gains tax reform provisions would help move the United States
toward a tax system that is more neutral toward saving and investment
and pave the way for a more fundamental tax restructuring.
Notes
1. Jorgenson's analysis uses multifactor productivity, which relates output
to inputs of both labor and capital. The traditional productivity measure
commonly found in popular articles is labor productivity, which relates
output to labor input alone.
2. Edward N. Wolff, "Capital Formation and Productivity Growth in
the 1970s and 1980s: A Comparative Look at OECD Countries," in Tools
for American Workers: The Role of Machinery and Equipment in Economic
Growth (Washington, D.C.: ACCF Center for Policy Research, March 1993)
pp. 46-76.
3. B. Douglas Bernheim, Do Households Appreciate Their Financial Vulnerabilities?
An Analysis of Actions, Perceptions, and Public Policy. Special Report
(Washington, D.C.: American Council for Capital Formation Center for Policy
Research, August 1994).
4. John Freear and William E. Wetzel, Jr., "Equity Financing for
New Technology-Based Firms," paper prepared for the Babson Entrepreneurship
Research Conference, Calgary, Alberta. May 1988.
5. Dale Jorgenson, Productivity: Postwar U.S. Economic Growth (Cambridge,
Mass.: MIT Press, 1995).
6. Lawrence B. Lindsey, "Capital Gains: Rates Realizations and Revenues,"
Working Paper No. 1893. April 1986 (Cambridge, Mass: National Bureau of
Economic Research, Inc.)
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