Number: RL30040
Title: CAPITAL GAINS TAXES, INNOVATION AND GROWTH
Authors: Jane G. Gravelle, Government and Finance Division 
Abstract: This study addresses the role of capital gains tax reductions in stimulating new firm formulation, innovation and growth through venture capital investments and tax-favored stock options. The historical relationship between venture capital investment and changes in the capital gains tax rate is examined. The target efficiency of general capital gains tax cuts as a method of stimulating investment in new and innovative firms is also considered, along with the desirability of reallocating investment to risky enterprises. Finally, the role of lower capital gains taxes in attracting talented individuals through executive stock options is discussed.
Pages: 11
Date: Updated July 14, 1999