Capital gains are taxed only after you sell the stock. "Buy and hold," the best long term stock strategy, means no taxes until much later. Stock kept in IRAs have even more tax benefits. There were a lot more capital-gains-type transactions during the Clinton years when everybody was stock-crazy than there were during the Reagan years. Table 1 from this article shows this quite clearly. is quite informative, as is the article.

I personally think that a lot of this stock-craze phenomenon can be tracked to the growth of Internet trading becoming available to the general public, which really hit its stride during the 1990s (E-Trade started in 1996). It goes without saying that a huge influx of amateur investors may have been one big reason for the rapid overgrowth of the stock market and the eventual bursting of the bubble.

The real benefit of capital gains tax reduction is removing a barrier to the movement of capital, which tends to flow to more productive areas when there are fewer restrictions. The end result is often more net revenue. The article is more skeptical about this than I am, which is odd if you look at Figure 2: