Dallas CPA Annual CPE Day

Yesterday (Friday, May 4, 2012) I was in attendance at the annual Dallas CPA Society continuing professional education day.  It is a day were around 1500 CPAs from northern Texas meet in one hotel (this year, the Dallas Hilton Anatole) to list to eight hours of updates in various fields of accounting.

The lunch speaker was one of Texas' US senators, John Cornyn, whose talk was entitled "The Prospects of Tax Reform."

And this year (2012), in case you're wondering, it is basically none. Actually, he never got around to saying that - but you could surmise it from all the "Bad Obama" this and "Bad Obama" that the Republican senator managed to utter in a 15 minute speech.

One of the interest tidbits he mentioned, though, was past presidents who had passed capital gains cuts - including Kennedy in the early 1960s, Carter in the later 1970s and Clinton in the 1990s - all Democrats.

The implication being that Democrats could pass capital gains tax cuts - but Obama was too headstrong to realize how good it can be for the economy.

Absent from Cornyn's discussion (and something I would have loved to ask him) was why he didn't mention the ultimate Republican of the 20th century, Ronald Reagan - who actually RAISED capital gains tax rates in 1986.

http://www.americanprogress.org/issues/2012/01/ta_012612.html

Why did Reagan allow this to happen?

Well, first, he brought the capital gains tax rate up to the same tax rate as ordinary income (wages, for example) - and that made the tax code simpler.  No longer did you have to worry about defining what a capital asset was, or its holding period as long or short term, or whether corporations or other taxable entities could be used to take advantage of the difference in rates.

Reagan also believe that not EVERY SINGLE YEAR IN HUMAN HISTORY does a cut in capital gains tax rate spur more investment than the resulting decrease in investments from the government using the cash instead (which many members of the Republican party seems to erroneously believe).  If you cut the capital gains tax rate, you give more money to the people and away from the government.  You better hope the people invested it quickly in projects which will spur jobs, increase standards of living, etc.  Nowadays though, in a risk-adverse US economy, that isn't happening.  Many people are content with sticking their money in a bank paying near zero percent interest rate, and banks aren't interested in lending money to anyone with a risky profile.

Somehow as Cornyn went down the list of democratic presidents who cut the capital gains tax rate, I knew he would never get around to the republican president who raised them... what a surprise... NOT!