Pragmatism And The Capital Gains Tax

Sane conservative Steve Chapman makes two obvious points:

Most economists believe that in the long run, the 2003 cut in the capital gains rate reduced revenue rather than raising it. For that matter, even the Bush administration's budget admits as much. Keeping the rate at 15 percent rather than letting it revert to 20 percent, it estimates, would cause a revenue loss of $79 billion over the next decade...

A low capital gains rate hinders the free market by inducing people (especially very wealthy ones) to find ways to take earnings as capital gains instead of ordinary income. In other words, it encourages them to do things that would not make economic sense otherwise. A modestly higher rate would discourage such wasteful avoidance.

If we could cut real spending, i.e. defense or entitlements, I'd be eager to keep taxes where they are. But at some point, we cannot keep deferring debt to the next generation. McCain seems to have forgotten this. Or rather pushed it out of his mind for political reasons.