A paper from the Joint Economic Committee demonstrates the broad favorable impact on workers and the economy of lowering the tax rate on capital gains. The study assumes a 50 percent exclusion of capital gains for individuals and 25 percent for corporations.

• Economist Allen Sinai figures such exclusions would raise economic output by $51 billion a year, after inflation, and businesses would spend $17.6 billion more each year on capital investments -- making their workers more productive.

• Thus, the economy would add close to one-half million new jobs by the end of the century and savings would rise $44.1 billion a year.

Separate research by DRI-McGraw Hill economist David Wyss forecasts the effects of a capital gains tax cut 10 years into the future.

• Real GDP would be 0.4 percent above what it would be without the cuts.

• Spending would rise an additional $18 billion a year -- lifting the capital stock an extra 1.2 percent.

• Productivity would be about 0.4 percent higher than otherwise.

As for the effect on government revenues, history shows that tax cuts actually result in more money going to the U.S. Treasury. The government collected $36.4 billion in capital gains taxes in 1985, when the tax rate was just 20 percent, versus only $36.2 billion in 1994 when the economy was bigger and the tax rate higher.

Source: Perspective, "Free Lunch," Investor's Business Daily, June 17, 1997.