New technology will be introduced along with labor-saving capital investment, and skilled workers will tend to replace unskilled workers.
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Most capital-income taxes are paid by working-age adults saving for retirement, who will continue to save despite taxes.
The capital-gains cuts will probably increase saving, which is good.
Mr Walker estimates domestic saving from money-supply and capital-account data (which, again, should be more reliable than national-account numbers).
In industry after industry when minimum prices are set on labor either capital ends up getting substituted through investment in labor-saving technology or low-skill jobs move overseas.
An even stricter test of capital-market integration, and the one on which the flows of saving and investment really depend, is that real (ie, inflation-adjusted) interest rates should be equal across countries.
Messrs Feldstein and Samwick assume that the creation of individual retirement accounts will result in higher national saving, which in turn will raise capital formation and thus corporate-tax revenue.
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GENEVA, Switzerland (Reuters) -- Aid agencies warned Tuesday that overwhelmed Baghdad hospitals were running low of life-saving medicines and that civilian casualties were mounting in Iraq's besieged capital.
By contrast, if you leave the same stock to the same person in your will, the recipient gets a stepped-up basis to the value as of your date of death, saving capital gains tax.
America may boast highly efficient labour and capital markets, but these advantages are partly offset by poor primary and secondary education, run-down public infrastructure, and inadequate saving that makes the country dependent on foreign capital.
Meanwhile, the 3.8-percent tax on unearned income, like capital gains, dividends, and interest, will discourage saving and investment.
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Mark Bloomfield is president and CEO of the American Council for Capital Formation, a nonprofit, nonpartisan organization dedicated to public policies supportive of saving and investment to promote long-term economic growth, job creation and competitiveness.
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