“ObamaNation” was apoplectic over ABC News’ decision to question Barack Obama over his associations with a Louis Farrakhan-sympathetic preacher and a college professor up from the Weather Underground. But the Illinois senator’s answers on questions that dealt with policy were even more illuminating. A segment on the economy included this exchange:
CHARLES GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent. … And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness …
GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.
OBAMA: Well, that might happen, or it might not. It depends on what’s happening on Wall Street and how business is going. I think the biggest problem that we’ve got on Wall Street right now is the fact that we got have a housing crisis that this president has not been attentive to and that it took John McCain three tries before he got it right.
Heritage Foundation budget and tax expert Brian Riedl comments:
This was the most astonishing statement of the debate. It’s one thing to advocate large tax increases in order to fund priority spending. Yet after tacitly acknowledging that capital gains tax hikes would likely reduce tax revenues, Sen. Obama was not deterred. He would nearly double these tax rates for the stated purpose of reducing the income of investors — even if it harms the economy and fails to produce a dollar of new tax revenues.
If this tax hike caused capital gains revenues to fall, would Obama actually reduce priority spending to “pay for” this tax increase? How many federal programs would he sacrifice towards the goal of reducing investor incomes?
The Wall Street Journal adds:
But Mr. Obama has also said he’s open to raising – indeed, nearly doubling to 28 percent – the current top capital gains tax rate of 15 percent, which would in fact be a tax hike on some 100 million Americans who own stock, including millions of people who fit Mr. Obama’s definition of middle class.
This is instructive. The facts about capital gains rates and revenues are well known to our readers, but we’ll repeat them as a public service to the Obama campaign. As the nearby chart shows, when the tax rate has risen over the past half century, capital gains realizations have fallen and along with them tax revenue. The most recent such episode was in the early 1990s, when Mr. Obama was old enough to be paying attention. That’s one reason Jack Kennedy proposed cutting the capital gains rate. And it’s one reason Bill Clinton went along with a rate cut to 20 percent from 28 percent in 1997.
Either the young Illinois Senator is ignorant of this revenue data, or he doesn’t really care because he’s a true income redistributionist who prefers high tax rates as a matter of ideological dogma regardless of the revenue consequences. Neither one is a recommendation for President.
Obama and Clinton endorsing a windfall profits tax on oil companies. If the oil companies are truly “gouging” as they also suggested, then that’s illegal and the FTC should investigate. But that’s been done. And even if the oil companies were artificially restricting supply (i.e. market manipulation), the end result would be in the same direction as a carbon tax or cap-and-trade, which both Clinton and Obama support. The only difference is who receives the revenue — oil companies or government. The truckers that Clinton talks about should know that under a carbon tax or cap-and-trade system, their prices would be even higher. That’s their purpose — to discourage energy consumption through government-induced higher prices and thereby reduce greenhouse gas emissions, all to improve social welfare.