Employment Effects of Reducing Capital Gains Tax Rates in Ohio

Entrepreneurial activity is a key driver of job creation, and entrepreneurs and their financiers are especially sensitive to capital gains taxes. As a result, a cut in the capital gains tax rate should be expected to stimulate job creation to some degree. We measure the magnitude of this effect by examining the treatment of capital gains across the 50 states over roughly the past 40 years. Our results suggest that a complete elimination of the taxation of capital gains realized by Ohio taxpayers would lead to the creation of 40,000 new jobs. Applying this estimate to proposals currently under discussion suggests a somewhat smaller effect.