WSJ and IBD agree — Obama’s a lightweight on tax policy
posted at 12:35 pm on April 18, 2008 by Ed Morrissey
The Wall Street Journal and Investors Business Daily certainly paid attention to the so-called “issues” portion of last Wednesday’s debate. Perhaps that’s why Barack Obama has decided to focus his attention on the stump to the supposedly irrelevant questions in the first part of the debate — because an analysis of his answers on taxation and investment show him as hopelessly over his head on actual policy. The WSJ accuses Obama of “tax evasion”:
Time and again, the rookie Senator has said he would not raise taxes on middle-class earners, whom he describes as people with annual income lower than between $200,000 and $250,000. On Wednesday night, he repeated the vow. “I not only have pledged not to raise their taxes,” said the Senator, “I’ve been the first candidate in this race to specifically say I would cut their taxes.”
But Mr. Obama has also said he’s open to raising – indeed, nearly doubling to 28% – the current top capital gains tax rate of 15%, 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. ….
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.
I made this same argument yesterday. Obama actually made this clear in his debate answer: he wants to raise capital gains tax rates because it’s fair to do so. After all, the government has no compelling reason, in Obama’s view, to offer a lower rate on risk and investment than it does on the income generated by risk and investment. Investors and economists see this differently, as King Banaian and I discussed on my show yesterday. Disincentivizing risk by raising the tax on its success will mean less capital investment and fewer jobs as a result — which might make the secretary unemployed rather than receiving that income in the first place.
IBD doesn’t focus on the evasion as much as it does the ignorance and envy that drives this kind of economic vision:
Indeed, data from Congress’ Joint Committee on Taxation show 20% of those with capital gains in 2005 had annual incomes less than $50,000. So Obama’s “tax-the-rich” plan to jack up cap gains rates would in fact become a huge middle-class tax hike.
Add to this his idea to lift the Social Security tax cap on incomes above $97,000, which would hit many of the same people, and you get the idea that Obama doesn’t understand economics at all.
Maybe it’s that he and his wife, Michelle, just reported $4.2 million in income for the last year — with little or none of it in the form of capital gains.
Whatever the case, he obviously doesn’t get it. He’d rather lash out at people he thinks are rich, even if it means bringing in less revenue to the federal government, a point that Gibson clearly made.
Democratic populists like Obama have failed to recognize a transformation in America. The investor class used to comprise only the richest Americans, and even as long ago as when Obama was first entering college, that remained true. However, thanks to changes in tax policy on long-term savings plans such as IRAs and 401Ks, middle America put its future into the markets. Over 70% of Americans now invest in stocks and bonds, and therefore have exposure to capital-gains tax changes.
That won’t stop Obama from weighting down the engine of economic growth or increasing taxes across the entire spectrum of American voters. He wants fairness, which translates to massive redistribution of wealth via the least efficient channel: government bureaucracy. It’s a statist solution, unsurprising from someone who sings a populist tune on the campaign trail.