Hillary Clinton’s most memorable economic proposal, debuted this summer, is her plan to impose a punishing 43.4% top tax rate on capital gains that are cashed in within a two-year holding period. The rate would drift down to 23.8%, but only for investors that sat on investments for six years.
This is known as a “tapered” capital-gains tax, and it isn’t new. Mrs. Clinton is borrowing a page from Franklin D. Roosevelt, who trotted out this policy during the severe 1937-38 economic downturn, dubbed the Roosevelt Recession. She’d be wise to consider how it played out.

President Herbert Hoover raised taxes in 1932 and expanded the number of brackets to 30 from 23. The top rate skyrocketed to 63% from 25%. But the highest capital-gains rate remained 12.5% until Congress enacted the tapered tax in 1934. Here’s how it worked: 20% of an individual’s capital gains were excluded from taxes after one year, 40% after two years, 60% after five and 70% after 10. This initially resulted in a maximum tax of 40% on capital gains for assets sold after two years.