Higher capital gains realizations are one likely source of the higher individual income tax revenues contributing to this year's decline in the Federal deficit. But capital gains realizations are highly variable over time, even in years when capital gains rates area stable. Between 1959 and 2003, the standard deviation of the ratio of capital gains realizations to gross domestic product (GDP) was about 40 percent of its mean value. In recent years, changes in the ratio of capital gains realizations to GDP have tracked changes in the ratio of the stock prices to GDP, which is about equally variable.
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