Obama on taxes
Topics: Campaign2008
26 Apr 2008
From: Ervan Darnell
This came to my attention from George Will, from a recent debate between
Clinton and Obama [1]:
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.
But actually, Bill Clinton, in 1997, signed legislation that dropped the
capital gains tax to 20 percent.
OBAMA: Right.
GIBSON: And George Bush has taken it down to 15 percent.
OBAMA: Right.
GIBSON: 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.
We saw an article today which showed that the top 50 hedge fund managers
made $29 billion last year [....]
OBAMA: [....] I believe in the principle that you pay as you
go. [...]
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.
[...]
The mere phrasing of the question suggests that liberals have succeeded
in brainwashing the country: the question was not "Won't higher
capital gains taxes ruin investment and leave the country
poorer?" The question was "Doesn't your policy mean the
government is less rapacious than before and that's a bad
thing?"
But overlooking that, Obama's answer is wrong on two fronts:
1) He's saying up front that he's not interested in economic reality,
he's on a crusade for some bizarre sense of fairness and is willing to
wreck the economy on the way there.
2) As I wrote about previously, his sense of fairness is totally wrong
too. Capital gains are already indirectly taxed by (the government
policy of) inflation. Taxing capital gains the same nominal rate as
salary income is actually a much higher tax rate.
Actually, I think Gibson's assumption is not accurate in that raising
capital gains rates induces investors to shift to dividends instead of
capital gains. Thus, the net loss of tax income is less than the
loss just on capital gains. But Obama accepted that line of
reasoning.
GIBSON: Senator Obama,
you both have now just taken this pledge [to not raise taxes] on people
under $250,000 -- and 200-and-what? $250,000?
[....]
OBAMA: [...] What I have proposed is that we raise the cap on the
payroll tax because millionaires and billionaires don't have to pay
beyond $97,000 a year. That is where it is capped. [....]
GIBSON: But, Senator, but that's a tax. That's a tax...
OBAMA: Well, no, no, look...
GIBSON: ... on people under $250,000.
OBAMA: [....]
So this is an option that I would strongly consider, because the
alternatives, like raising the retirement age or cutting benefits or
raising the payroll tax on everybody, including people who make less than
$97,000 a year...
GIBSON: But there's a heck of a lot of...
OBAMA: ... those are not good policy options.
GIBSON: There's a heck of a lot of people between $97,000 and
$200,000 and $250,000. If you raise the payroll taxes...
OBAMA: And that's...
GIBSON: ... that's going to raise taxes on them.
OBAMA: And that's why I've said, Charlie, that I would look at
potentially exempting those who are in between.
Let's see:
1) He's going to "pay as you go" with an existing huge deficit,
lots of new spending proposals ($800G according to CATO [2]), and not
raises taxes on people making < $250K? That sounds more like
fantasy than "hope" to me.
2) 'People making $100K/year are millionaires'. I see.
3) He's opposed to any reform like raising the retirement age or cutting
benefits, and not even mentioning any all real reform like a private
escape hatch.
4) But here's the real rub: Social Security at least weakly ties benefits
to taxes (albeit at a return rate lower than the worst managed mutual
fund). Obama is proposing to drop that linkage and add a 13% tax
increase on income above the cap, with no corresponding benefit
increase. That's a huge welfare transfer payment. I don't
know if the size of it or the disingenuous lie about how it's financed is
more galling (at least have the honesty to pay for welfare out of
the general budget). It's really a case study in why the government
should never be allowed to run any service, because tax policy to fund it
will become detached from any rational basis for the service
offered.
[1]
http://abcnews.go.com/Politics/DemocraticDebate/Story?id=4670271&page=3
[2]
http://www.cato.org/pub_display.php?pub_id=9234
====================================================
Ervan
Darnell
ervan@kelvinist.com
http://www.kelvinist.com
====================================================
Ervan
Darnell
ervan@kelvinist.com
http://www.kelvinist.com
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