If we’re looking for a surefire way to boost tax revenue, invigorate the economy, and chip away at our annual budget deficit, the answer is clear: it’s time to reduce the capital gains tax, currently set at 23.8% for substantial gains. Historical precedent suggests that the moment to act is now.

As we get the final data for fiscal year 2025, which ended on September 30, 2025, it’s clear that efforts to rein in government spending have yet again fallen short. Despite President Trump’s concerted push to trim the budget and DOGE’s recommendations for cutting hundreds of billions in waste, fraud, and abuse, we are staring down another staggering $2 trillion deficit.

This has pushed our public debt to a jaw-dropping $37.3 trillion. While exact tax revenue figures for September aren’t available just yet, it appears the federal government collected a record $5 trillion — marking a 4% increase from fiscal 2024. However, this wasn’t enough to offset a whopping $7 trillion in federal spending.

Economic growth for 2025 seems to present a mixed bag. GDP contracted by .6% in Q1, only to rebound with a positive 3.8% Q2. Current estimates suggest Q3’s growth will languish between 1% and 2%, leaving us desperate for stronger growth to prevent rising unemployment. Inflation remains a persistent challenge, currently sitting at 2.7%; economists and the Federal Reserve are striving to bring it down to at least 2%.

Can we reconcile these economic issues — stimulating growth, curbing inflation, and increasing tax revenue? A focused solution could be found in the history books. Back in 1996, the federal government sought a way to spur economic activity and bolster tax revenues. The solution? A cut to the capital gains tax from 28% to 20%. The results were overwhelmingly positive.

When President Clinton signed that capital gains tax reduction into law, it took effect in 1997. Capital gains tax revenue was a mere $94 billion in 1996, but by 2000, it had surged to $126 billion. During that time, economic growth soared, averaging over 4% annually from 1997 to 2000.

Total tax revenue experienced a corresponding spike, jumping from $1.6 trillion in 1996 to over $2 trillion by 2000. Inflation rates, too, fell from 3.3% in 1996 to 1.6% in 1998, albeit with slight increases in subsequent years.

This era of fiscal prudence saw Clinton and House Speaker Newt Gingrich collaborate to keep government spending in check, yielding annual budget surpluses from 1997 to 2000.

It’s evident that cutting the capital gains tax stimulated growth, reduced inflation, increased tax revenue, and led to budget surpluses. We desperately need a revival of that financial environment today. Lowering the capital gains tax from 23.8% to 15% could be our pathway forward.

A reduced capital gains tax rate would encourage capital formation in our capital-intensive economy, potentially ramping up growth to 4%. This translates to greater opportunities for well-prepared Americans, resulting in lower unemployment and rising real wages.

Moreover, with fewer individuals reliant on social programs, we would see a corresponding decrease in government spending on these initiatives.

Critics might argue that such a tax cut merely benefits the wealthy, and to some extent, they’re correct — most new capital is generated by those with greater financial resources. However, that capital creation is essential. When invested, it fosters economic growth that ultimately benefits us all.

It’s also worth noting that approximately 60% of Americans are investors in the stock market. With a lower capital gains rate of just 15%, those investors would retain 85% of their gains when they sell stocks, as opposed to losing a larger chunk to taxes.

Consider homeowners, too. The current tax structure allows individuals to keep the first $250,000 of gains from the sale of their primary residence (or $500,000 for couples). Given the inflated housing prices today, many ordinary couples find themselves facing taxable gains that exceed these thresholds. A lower capital gains tax could ease their tax burden as well.

Perhaps most importantly, increasing capital availability would empower businesses to meet rising demand — not by hiking prices, but by ramping up production. Such a shift would promote more substantial economic growth and exert downward pressure on prices.

Now is the time to seize this opportunity. A capital gains tax cut to 15% could be the catalyst we need to foster a thriving economic landscape. Let’s make it happen.

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