Senator Obama was asked in last night’s debate about his proposal to raise capital gains taxes. His response says a lot about how he views the government’s role in the economy. Dan Mitchell at Cato had this to say:
Every so often, a politician commits the horrible mistake of saying what he really thinks. This happened at the Democratic debate. Barack Obama has a very punitive proposal to nearly double the capital gains rate. When asked by one of the moderators whether this makes sense, especially given the historical evidence of big “Laffer-Curve” effects, Senator Obama dismissed concerns about falling revenue, arguing that a high rate was justified by “fairness.” In other words, Senator Obama is so fixated on punishing success that he is even willing to reduce the amount of tax revenue flowing to Washington that he and his buddies can redistribute.
In my lifetime, every time the capital gains tax has been lowered, it has produced higher revenues. And every time it has been raised it has produced lower revenues. And Obama is apparently aware of that fact and he doesn’t care. He thinks that if you are smart or lucky enough to generate a capital gain, well you don’t deserve to keep it. He (or some other politician) should get a portion of that gain to pass along to someone more deserving. I’m not sure how they determine who is deserving.
More importantly, Obama (and many others on the left of the political spectrum) don’t understand the link between the cost of capital and economic growth or the trajectory of the stock market. Check out this exchange between Obama and Charlie Gibson, the moderator:
MR. GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.
SENATOR OBAMA: Well, that might happen or it might not. It depends on what’s happening on Wall Street and how business is going.
It apparently hasn’t occurred to Obama that there may be a link between the cost of capital (which is raised when capital gains taxes rise) and the performance of the economy and the stock market.