Capital Gains Guru Goes Missing

Chuck Sheketoff

On Wednesday, March 23rd, the Senate Finance and Revenue Committee held a hearing on a slew of bills that would reduce the income tax on capital gains (PDF). The hearing was much like one held on March 10 in the House Revenue Committee (PDF), where a gaggle of business groups and speculators pleaded for a tax cut that mostly would benefit the wealthiest of Oregonians and force even deeper cuts in programs that support low-income and middle-class Oregonians.

Notably absent from Wednesday’s Senate hearing was tax attorney Neil Kimmelfield.

Kimmelfield attended the House hearing two weeks earlier because he’s been drafting a proposal for Representative Shawn Lindsay, a colleague at the law firm of Lane Powell.

In introducing Kimmelfield to the committee, Rep. Lindsay described him as “a guru tax person, a nerdy tax person” and “one of the best tax attorneys on the West coast.”

Representative Cliff Bentz asked Kimmelfield, who was testifying on his own behalf, not on behalf of any client, how the legislature would measure the success of a targeted capital gains cut approach like the one he was helping to draft.

And that’s when the hearing got really interesting. Here’s what Rep. Lindsay’s Tax Guru told the Committee beginning at 29:26 of the hearing (Link to audio):

My personal experience from 30 years of tax practice is that the economic impact of tax incentives is far less than anyone anticipates that they are going to be. My experience is that people in business make decisions for reasons for the most part other than tax reasons. And unless there is a targeted financing incentive, that for example the new markets tax credit program at the federal level, that creates opportunities to use tax benefits to do particular types of transactions that might not otherwise be done, simply reducing rates even in particular areas is not an efficient way to encourage activity.

Rep. Bentz then asked if a targeted approach isn’t the answer, what alternative would work to get more people to view Oregon as attractive, and Kimmelfield replied:

From talking with people who are in the business of helping start-ups, helping entrepreneurs, attracting businesses, the comment that I have gotten time and time again is that it’s not the capital gain rate; it is the rate on ordinary income. That people are discouraged from coming to Oregon because of the high rates on ordinary income much more so than on capital gains. I think that tax reform of the type that has been discussed that would impose a low rate sales tax and a significantly reduced income tax would do far more to encourage investment in business activity in Oregon than anything that the legislature can afford if there is no sales tax.

Rep. Bentz then quipped: “This puts a bit of a damper on the balance of our conversation about capital gains.”

For those wealthy speculators who want their tax cut on the income from capital gains come hell or high water, Kimmelfield’s testimony must have made them cringe, just as the practitioners of bloodletting must have been aghast when a consensus of doctors concluded that bloodletting makes the patient worse off.

Neil Kimmelfield was noticeably absent during this week’s Senate Finance and Revenue Committee hearing on capital gains. The Senate committee didn’t get to hear the Tax Guru's honest observations that people in business make decisions for reasons for the most part other than tax reasons and that simply reducing rates even in particular areas is not an efficient way to encourage business activity.


Oregon Center for Public PolicyChuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

Comments

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    Well of course he did. Daring to say that a talking point was less then truthful? Next he'll say that money spent on welfare and food stamps programs actually generate wealth, then we'd all be screwed.

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    Capital gains tax rates are an interesting political football. Almost no one (except the wealthy) gets to take advantage of them, they are not the deciding factor is most investments, and the logic for them is fuzzy. The only legitimate reason for lower capital gains rates is that they are sometimes onetime bonuses after years of investment - the old "income averaging" was the way to overcome that problem. The very wealthy have been quite successful at including capital gains into the everyday Republican's vocabulary. Dems need to focus on defeating them.

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