April 16, 2008
Democratic Debate: Taxes
Obama wants to raise taxes on people making more than $100K, citing the importance of paying for Social Security.
Question: Why do we have to pay more taxes? Why not cut spending?
Answer: Because Democrats always -- ALWAYS! -- believe that "fiscal responsibility" means raising revenue (taxes), but never cutting spending.
Moderator Charlie Gibson throws out a good question, prefacing it with the factual statement that cuts in the capital gains tax have always -- ALWAYS! -- resulted in an increase in cash landing in the government's trough. Given that fact, he asks if either candidate is willing to swear off an increase the capital gains tax.
Clinton says she won't raise it above what it was during her husband's administration, which is a limited promise to screw us only a little bit.
Obama disputes the premise of the question, saying it's debatable that increased tax revenue has anything to do with cuts in the tax rates, then engages in a bit of flim-flam, saying that millionaires with lots of stocks are paying less taxes, at a lower rate, than their secretaries.
And, after all, he's for fairness; who can be against fairness?
What Obama doesn't say, of course, is that those millionaires have already paid taxes on their income when they earned it, to the IRS and their states; he wants to tax them again, taking another bite after they try to realize some of the profits on their investments, investments that contributed to the growth of the entire economy.
Obama says we need to raise more money to "finance" health care for those Americans without health insurance.
"Finance" means you and I are forced to pay for health care for people who, through ignorance, sloth, stupidity, poor job choices or just plain bad luck aren't listed on our policies. So, we should be forced to hand over more of our hard-earned cash, to buy for these people the health care they haven't planned or budgeted for.
As I listen to this debate, I have a hard time hearing what they're saying over the shrieks of agony coming from my wallet and my 401K.
Posted by Mike Lief at April 16, 2008 06:17 PM
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Comments
There is no question that lowering capital gains tax increases government revenue, but it is not because it necessarily increases economic production. Most wealthy people and institutions choose when to recognize gain. When capital gains rates are lowered, they assume that the low rates will be temporary and choose to pay the tax rather than defer it. When rates are high, they engage in the same transactions as they would if the rates were low but do so in a way that allows them to defer the tax (such as 1031 exchanges). I would bet that a further decrease in the capital gains rate would generate a modest increase in revenue. An increase will most certainly reduce revenue because taxpayers will simply choose to defer the gain.
By the way, do you remember the tax shelter problems of the mid-80's and earlier this decade? Most of those tax shelters were designed to generate losses to offset gains when the capital gains rates were high -- 1980's through 2001 Bush Tax Cuts. They were used by people who could not or would not simply defer recognition of gain into the future. I think that an increase in capital gains rates would result in decreased government revenue and increased tax enforcement. Not a good situation.
Posted by: CPT AP at April 17, 2008 03:23 PM