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Kerry and Bush have very different plans for future capital gains rate. Because this rate effects the return on investment, it has a major impact on stock valuation. Kerry plans to let the rate revert to 20%, while Bush plans to eliminate it. At the 15% rate, investors receive 85% of the underlying company's profits and future growth. Under Kerry, this return will drop 6% to 80%, after the increase to 20%. Under Bush, the probable yield remains 85%, since abolishing the cap gains tax is politically unlikely. However, if capital gains could be abolished the yield would increase 17%,...

If Kerry is elected, stocks should drop by 6%, or $1.2 trillion, since the yield on securities drops from 85% to 80%, other factors remaining equal. If Bush is elected, stocks rise by 17%, or $3.4 trillion, since yield increases to 100% from 85%. Difference between candidates is $4.6 trillion. However, to compensate for the lost $100-150 billion per year in tax revenues, Bush's plan should include a one-time capital gains tax on all capital appreciation prior to the 0% rate date. This $1 trillion in revenues could be paid over 4 years, wiping out the annual deficit. It opens...