Christopher Shays: “And important, for a variety of reasons. First off, we need to recognize that when you increase some taxes you actually…”

“And important, for a variety of reasons. First off, we need to recognize that when you increase some taxes you actually get less revenue because in a dynamic model people respond. They say taxes are higher and they find ways to avoid paying them by doing other things. If you have a luxury tax on boats, they simply decide not to buy boats, as we found in our 1990 budget agreement when we increased the tax on boats and people stopped buying them. So you have a dynamic model. Sometimes with lower taxes you get more revenue. We would find that to be true specifically with the capital gains exemption. Imagine a farmer out West whose neighbor wants to sell land and they want to buy the land, but the neighbor does not sell, and why does the neighbor not sell? Because they would realize such a large capital gain, they do not want to pay 28 percent of that gain to the Government. It might be what is their retirement, it might be what pays for their child's college tuition, and so they simply do not sell. What you have is, you do not have a transaction taking place, whereas if we lowered the capital gains you would find, in fact, that there would be greater transactions and more revenue. So one of the things that we hope happens is that there is, in fact, a capital gains exemption. We also hope that there would be a reduction in the tax that people pay on inheritance so that they do not have to sell the farm or sell the business.”