Obama’s Proposed 87% Increase to Capital Gains Tax Exactly What the Economy Doesn’t Need…
While trillions of dollars in capital has disappeared from the markets, adding a dis-incentive for investors to return to the markets is a sure-fire strategy for lengthening the current downturn. And when companies cannot readily access capital, they can’t build new plants, take on R&D expenditures or do all those other things that lead to the people on “Main Street” gaining access to new jobs.
What’s worse is that Mr Obama does not seem to understand the fundamental difference between a tax rate and tax revenue: changes in tax rates lead to changes in the way people behave. For example, Presidents Ronald Reagan, Bill Clinton and George W. Bush all cut the Capital Gains Tax. Under Clinton, it was 28%. Under George W. Bush it sits at 15%. After each of these tax cuts, tax REVENUE actually increased.
The kind of increase Mr Obama proposes therefore has a dual negative effective with no discernible upside: investment capital stays out of the market and government revenues from the Capital Gains Tax shrink.
So why would Senator Obama consider such an ill-fated move? He thinks it’s “fair”.
You can see Mr Obama’s explanation in the video below – note Jim Lehrer, the moderator, attempt three times to explain to Senator Obama that tax revenue decreases as the Capital Gains Tax increases.