Ed Huntress wrote:


Meantime, we live in fear of "scaring it away" and race to the bottom,
allowing $1.00/hour wage-rate countries to dictate the world wide
patterns of manufacturing and capital flows, with undertermined
effects.

Capital gains tax does not scare capital away.
It really does the opposite. It taxes capital when it is liquidated.
And more important higher gains tax does not discourage investment in
higher income producing assets in favor of non-producing
assets.

The problem is that once you have lowered
the tax rate below ordinary income, then it becomes problematic
to raise it back up again. If the tax were raised now,
then you can expect the price of gold, stocks, houses and other
assets would all plummet as people sell off assets to realize their
gains
before the tax goes up. That illustrates that it is the
tax benefit that has driven up the price of those assets to begin
with.