A boring economics lesson. Pay attention!

There’s a lot of talk in the political world, particularly on the right, on how we can turn the economy around by cutting capital gains taxes.

So you should ask, “What are capital gains?”

1. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset’s purchase price.

2. Profit that results when the price of a security held by a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss would occur when the opposite takes place.

OK. You’re officially bored. So why should you care?

Because Marco Rubio, the Florida Republican who’s running for president and gives the impression he can’t even balance his own checkbook, says capital gains taxes should be elliminated:

020416krugman2-blog480

And now I’ll let Paul Krugman explain what this means:

Josh Barro notes that Marco Rubio’s proposal to eliminate taxes on capital gains goes well beyond anything we’ve seen from previous Republican contenders, even highly conservative candidates. It seems worth adding some numbers on just how much this would be a giveaway to the very, very rich.

The nonpartisan Tax Policy Center has the information, illustrated by the pie chart above. Half of taxes on dividends and long-term capital gains are paid, not by the 1 percent, but by the 0.1 percent — the richest 1/1000th of Americans. Another 29 percent are paid by the next 0.9 percent. Everyone else — the other 99 percent of the population — pays just 21 percent of the total.

So this is a tax cut not just for the rich, but for the very, very rich, with essentially nothing for the vast majority of Americans. And there is, as Barro says, absolutely no reason to believe that there would be large economic benefits from this giveaway.

Time to toss another GOP frontrunner down the tubes. And the selection doesn’t get any better from here.

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