Video: Obama’s redistributionism on capital gains taxes

posted at 1:40 pm on April 17, 2008 by Ed Morrissey

Critics of last night’s debate complain that the first half focused on irrelevancies. Unfortunately for Barack Obama, he didn’t do much better on the relevancies, either. Take for instance this portion of the debate when Charles Gibson asked him about the capital-gains tax rate and his plans to almost double it. Gibson makes it clear that raising tax rates reduce their revenue, but Obama assumes a greater revenue anyway — and that’s not even the most clueless part of the exchange:

SENATOR 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 — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.

And what I want is not oppressive taxation. I want businesses to thrive and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools.

And you can’t do that for free, and you can’t take out a credit card from the Bank of China in the name of our children and our grandchildren and then say that you’re cutting taxes, which is essentially what John McCain has been talking about. And that is irresponsible.

You know, I believe in the principle that you pay as you go, and you don’t propose tax cuts unless you are closing other tax breaks for individuals. And you don’t increase spending unless you’re eliminating some spending or you’re finding some new revenue. That’s how we got an additional $4 trillion worth of debt under George Bush. That is helping to undermine our economy, and it’s going to change when I’m president of the United States.

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. I think the biggest problem that we’ve got on Wall Street right now is the fact that we’ve got a housing crisis that this president has not been attentive to and that it took John McCain three tries before he got it right.

And if we can stabilize that market and we can get credit flowing again, then I think we’ll see stocks do well, and once again I think we can generate the revenue that we need to run this government and hopefully to pay down some of this debt.

Read and listen very carefully to this. The higher priority for Obama isn’t to raise revenue; it’s to ensure fairness. In order to do that, he will have the government take a bigger share of the gains and redistribute them through social programs to others. The pretense of having more money acts as a veneer for good, old-fashioned redistributionism

And his example shows his bias. He talks about billionaires paying a different rate than secretaries on income, but that’s purposeful. The idea behind a lower capital gains tax is to encourage risk-taking. The secretary in this parable garners an income at much lower risk because investors have taken a risk in creating her job. When the risk succeeds, it generates much more taxable income across the board. When it doesn’t, the investors lose a lot of money.

If the risk carries a heavier tax burden, less money will go towards investment. People will instead put their money into safer, less risk-intense areas, such as savings or low-yield bonds and commodities such as gold. That will create fewer opportunities for employment, which translates across the board into less revenue for the government as well as a stalled economy. The surest way to start an economic disaster is to increase penalties for investment.

Obama’s blindness on capital gains reveals a hard-Left mindset. He sees investors always profiting and never losing, while the people who work at jobs created by successful investment as victims of this exchange rather than the beneficiaries of it. Obama wants to use the heavy hand of government to take away the rewards of risk from those who invested, and instead redistribute it to those who took no risk to create economic growth. In doing so, he will kill the engine that drives the American economy.

Obama either fails to understand how a free-market economy grows, or simply doesn’t care. Either way, it makes him a dangerous choice for the Presidency.

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What blew my mind, is that a Liberal member of the big media actually acted as if he knew the truth about how capitalism works, about how great capitalism is when left alone by big government. The fact that Obama didn’t know how to answer this question was not surprising in the least, as Liberals haven’t a clue about the greatness of capitalism. I wonder who schooled Gibson?

This debate was viewed by approximately 10M people. This was the most revealing debate of this campaign, as ABC actually played the part of the media by forcing the politicians to face the nation and answer questions and topics that actually matter. Both Obama and Clinton were forced to take off their masks and reveal truths about themselves that they hid successfully until now. Truth is, in a general election Liberalism has failed historically. The people don’t want a President who blames America for the worlds problems; who is embarrassed by the American flag; who loathes our military; who loathes capitalism and it’s principles; who believes in big government rather than American exceptionalism…

Liberalism sucks in every form, color, and shape!

Keemo on April 18, 2008 at 8:09 AM

The problem is far too many Americans don’t understand free markets and want this “fairness” thing.

aikidoka on April 18, 2008 at 8:10 AM

He doesn’t know what the HELL he’s doing! (Pardon my French)

CynicalOptimist on April 18, 2008 at 8:36 AM

He wants to punish the greedy investors!

manfriend on April 18, 2008 at 8:43 AM

I’ve said all along, “An empty suit!”. And a dangerous one at that.

Golfer_75093 on April 18, 2008 at 9:02 AM

If this guy ever makes president you better get out of the stock market pronto. There won[‘t be enough value left in your portfolio to buy a stick of gum.

MaiDee on April 18, 2008 at 9:03 AM

I knew that truth had scored a major victory in this “debate” when Tom Shales, the Michael Moore of TV criticism, started whining like a stuck pig. And of course the “Deliverance” motif is never far from the surface with those two slobs. Barack, you ain’t going nowhere ‘cept the South Side with friends like that.

horatio on April 18, 2008 at 9:52 AM

We’ve all heard: “When you can’t dazzle ’em with brilliance, baffle ’em with bull-sh!t.”

His comments are nothing more than clueless economic jibberish.

Oh wait…I’m sittin’ on my dead ass during the election, ’cause I want economic chaos, and McCain is a poopy-head…nevermind

franksalterego on April 18, 2008 at 9:56 AM

My liberal sister-in-law is of the same mindset as Obama. Though she, her husband and kids live in a very nice home, she’s envious and jealous of the rich.

I told her that when my Dad retired, he took all his retirement savings and opened his own business. It was a huge risk, that fortunately, paid off. It could easily have gone the other way. I told her I don’t begrudge anyone their wealth. They risk much to get where they are. I also said they if she’s looking for “fairness,” she should move to Cuba.

SoldiersMom on April 18, 2008 at 10:23 AM

What dimwitted libtards do not understand is that people like me – little people who work for big “evil” corporations – are offered a chance to buy our big evil corporation’s stock at a discounted price every quarter, (in my case %15 below the lowest quarterly rate.) It’s a voluntary deal, (another thing liberals don’t understand,) and I can cash it in at any time to pay for things like new windows for my house or a new heater or some type of emergency that comes up. Despite the market fluctuations, I’ve not lost any money on this deal, mainly because I buy the stock at such a great price. The issue is that we have to pay capital gains on the money whenever we decide we need it, so we always have to consider whether we can afford to pay the taxes on it if we cash it out.
So this fiscal idiot does not get that raising the capital gains taxes penalizes regular folks like me. They are so fiscally stupid that they not only want to penalize rich people for being successful, but they want to penalize middle-class people who live within their means and act responsibly – who are trying to take advantage of a great opportunity offered by their employer.

foxforce91 on April 18, 2008 at 10:49 AM

There was even a time when the Christian Coalition determined that its number one legislative priority was tax cuts for the rich. I don’t know what Bible they’re reading, but it doesn’t jibe with my version.

OK, Obama, show me a Bible passage that says we’re supposed to tax the rich at a higher rate than the poor. You can’t. This is just more of your Godless Socialism/Communism. The Fair Tax is needed to bring fairness back to our taxation system, and it will bring growth to our economy when we aren’t spending countless hours preparing IRS tax returns.

The above quote, by the way, comes from the same speech where Obama openly shared his dream of his UCC church inspiring another revolution in this country. He wants to inspire a Communist revolution in the USA. Everything you’ve heard from Rev. Wright’s mouth is what’s in Obama’s head.

Red Pill on April 18, 2008 at 11:03 AM

SoldiersMom on April 18, 2008 at 10:23 AM

I agree with you 100%, and please allow me to add to that.

Democratic Socialists preach the gospel of “fairness”, and some of the masses, out of greed, eat that up. But to the Democratic Socialists in power, it’s not about “fairness” at all. It’s about power and control. In a Socialist/Communist state, the masses become equally poor. The party heads, however, are wealthy. The party heads control the wealth. The party heads control the power. The party heads control the people. No one can rise out of the masses without submission to, and the approval of, the party heads. The party heads say, “Vote for me, and I’ll give you this…”, referring to some mere table scraps tossed to the masses to buy their vote. It’s why a pure Democracy fails the minute that people start voting for people who will give them whatever they want. You can’t give someone something for nothing without first taking it from someone else and giving them nothing for something.

When the scales tip to the side where more people are getting something for nothing and less people are nothing for something, it all starts going downhill…when the producers get to the point where they are so heavily taxed that it is no longer worth their effort to take risks and work hard, they give up…they shut down the company, everyone loses their jobs, and that is the beginning of the end of the country.

Our Constitution was written by men who were inspired by God. It intentionally limits the power of our government officials. It is the exact opposite of a Socialist/Communist state. Any common person can rise from nothing to something great, without submission to, and the approval of, the party heads. The USA has always been the land of opportunity, and people from all over the world want to live here. We enjoy freedoms that no one else on earth enjoys. We must defend our Constitution from all enemies, foreign or domestic.

Red Pill on April 18, 2008 at 11:22 AM

If it was about “fairness”, John Edwards would not live in the mansion he lives in. He would live in an average house, because that would be “fair”.

But it’s not about “fairness”. It’s about power and control.

Hmm…power and control…remind you of any movie?

The Matrix, perhaps?

Red Pill on April 18, 2008 at 11:25 AM

Why did both Obama and Clinton each make secret visits (without the press corps that normally follows them, but the visits were still exposed by tipsters) to John Edwards’ house in NC?

Red Pill on April 18, 2008 at 11:29 AM

Obama doesn’t need to worry about the federal deficit or the state of the economy. He and his wife will always make very decent livings from jobs provided by the Democratic party power structure. And if he can screw over some hedge fund managers along the way he’ll be happy.

snaggletoothie on April 18, 2008 at 12:29 PM

I guess he thinks all of those bitter working class people in Pennsylvania love this class warfare rhetoric.

rockmom on April 18, 2008 at 2:49 PM

Hedge fund manager vs his secretary. Hmmm, just a down and dirty overview.
1) HFM has years of experience in creating wealth for others, including small folks like us who invest in their offerings.
2) $29 billion is not entirely cash income, a majority is in stocks and other vehicles that defers taxation;
— if the instruments crash, upon cashing in, he has less, or nothing and even perhaps capital loss
— flipside, instrument soars and he reaps enough to offset any amount of taxation
3) His secretary is not some run of the mill secretary, bank on it that she pulls 6 or even 7 digits. From her POV, even at a higher rate of taxation, she still pulls more than her sisters at “lowly” corporate offices.

Obambi’s logic doesn’t compute.

HFM vs OPP’s capital gains and/or death taxes. IOW, why are Warren Buffett, Soros and others so pro-death taxes? Follow the money.
1) Joe Six-pack gets slapped with a capital gains and/or estate tax when pappy passes. J6 has a deadline to pay. Result?
–Fire sale of pappy’s estate upon which WB, GS & pals swoop in gaining assets for as little as 10 cents on the dollar.
–Family wealth is siphoned off
–Govt get initial profit and again when #2 happens
2) Having made an “investment”, HFMs sit on asset until they can get the highest return on investment.
3) What does it matter to WB if he pays 15%, 25% or even 50 or 75% in capital gains? He still has earned more money than he could have if assets were originally sold at going market rates.

Bottomline, our current tax structure is a lose-win-win-win. -Joe Six-pack loses.
-HFM wins, on our backs naturally.
-Politicians win contributions and buys votes for control of the treasury to perpetuate the scam.
-Government wins revenue on an asset taxed multiple times to pay for pork.

When it comes to higher taxes, it is a briar patch, where the insiders continue to gain as us proles become equally poorer.

To wit, do the Clintons care that 1/3 of their income went to taxes? Heck no! The 2/3s they’re left with is far more than they would have had in real jobs, let alone stayed at the pinnacle of Arkansas politics. The income wasn’t so much earned as it was a payoff for being insiders. The difference between Jim Wright & Bill Clinton is that JW self-published and Slick got a free-market publisher to do it for him.

Stifling regulations, OTOH, force corporations to move overseas, thus sheltering ever more $$ from the US Treasury and simultaneously cutting jobs.

AH_C on April 18, 2008 at 5:08 PM

Obama’s talk resonates among the proletariat. He’ll have time to tack back toward the center by the time folks start paying attention by the fall.

Why doesn’t he simply say he will tax every dollar above $250,000 at 90% and be done with it. It will be the fastest economic and political lesson he’ll ever learn.

moxie_neanderthal on April 18, 2008 at 8:02 PM

Hmm, the last of my stocks hit “long term” later this year; and I’m going to be taking all my gains (probably near the election…

First we have Obama wanting to raise this tax, also we have Bill Clinton’s example of a retroactive tax hike (passed in June as I recall, applied to that January); so we’ve got precedent for Jan 2009 to be a cutoff.

I’d worry about you guys beating me to the punch, and watching stock prices drop; but enough institutional investors are in the market where I am that it won’t make too much difference (unless there’s a big pullout there too).

My concern is what if McCain is elected, and keeps the Cap Gains tax cut til 2010, but can’t extend it; or Obama doesn’t have the moxie/pull to make the tax hike retroactive.

Can you imagine a market where every investor has a financial interest in doing two things…
1) Take profits before the end of the year.
2) Wait til the stock price bottoms out before re-buying.

What’s the “low” when everyone is selling and nobody is buying? We may get to find out, because when the tax rate difference is 15% vs 35%+, and you’re looking at losing 20% of your profits to taxes if you don’t play… everyone plays.

And when everyone’s goal is the same (get out, and wait for the bottom) I’m not sure where the bottom ends up.

If this happens, it may not be safe to drive down Wall Street. Falling brokers can seriously damage your vehicle.

Although, if too many people think like I do toward the end of this year; we might get to see a “trial run” of this.

What will be the effect on the economy? I couldn’t begin to guess.

gekkobear on April 19, 2008 at 3:11 AM

Democratic Socialists preach the gospel of “fairness”, and some of the masses, out of greed, eat that up. But to the Democratic Socialists in power, it’s not about “fairness” at all

Last time I checked, Alan Greenspan and most other economists agreed that tax cuts had gone too far, and that balancing the budget was more important than extending every tax cut irresponsibly passed by Bush. Sure, lower taxes, that’s great, but do it through spending cuts, not by charging up the collective credit card known as the national debt.

When your ‘tax cuts’ are preserved in the status quo, it only undermines the country by placing everyone into further debt. The money that you ‘save’ by these tax cuts will have to be paid in the future with added interest. Anyway, the same dire predictions of a massive recession were made by Republicans in the first Clinton term. The same logic was applied in the early 90’s- pretend that the deficit doesn’t exist, assume that lower taxes are more important than the bond market. Some lessons are apparently hard to learn.

bayam on April 19, 2008 at 8:58 PM

It’s why a pure Democracy fails the minute that people start voting for people who will give them whatever they want. You can’t give someone something for nothing without first taking it from someone else and giving them nothing for something.

Sounds like tax cuts that have no actual basis in the budget or federal revenue. You’re taking from the next generation to give a gift to the present.

bayam on April 19, 2008 at 9:00 PM

Last time I checked, Alan Greenspan and most other economists agreed that tax cuts had gone too far, and that balancing the budget was more important than extending every tax cut irresponsibly passed by Bush. Sure, lower taxes, that’s great, but do it through spending cuts, not by charging up the collective credit card known as the national debt.

You don’t know what the hell you’re talking about. The Bush Tax Cuts INCREASED Federal Income Tax Revenues by over 25%. Congress/Bush also happened to increase spending by even more.

How does that relate to the fantasy you said?

VinceP1974 on April 20, 2008 at 5:49 AM