Obama stumbles on capital-gains tax again
posted at 4:25 pm on April 27, 2008 by Ed Morrissey
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Earlier today, I reviewed what I thought were the worst stumbles Barack Obama made in his Fox News interview with Chris Wallace this morning. However, a few e-mailers point out a more subtle mistake on the capital-gains tax, the same subject on which he failed miserably in the April 16th debate. A YouTube has begun making the rounds showing Obama attempting to walk back his previous position, but not really comprehending why he has to do so:
OBAMA: … If you look at my approach to taxation, what have I said? I’ve said I would cut taxes for people making $75,000 a year or less. I’d cut taxes for seniors who are making $50,000 a year or less. It is true that I would roll back the Bush tax cuts on the wealthiest Americans, back to the level they were under Bill Clinton, when I don’t remember rich people feeling oppressed.
In terms of capital gains, I’ve suggested we might go back up to 20 because –
WALLACE: You have suggested 28.
OBAMA: Well, but what I’ve said is, I certainly would not raise it higher than it was under Ronald Reagan. But the fact is, is that I’m mindful that we’ve got to keep our capital gains tax to a point where we can actually get more revenue.
But that’s not something that’s going to affect the average person with a 401(k). When people start talking about how, well, there are millions of Americans who own stock, most of them own stock in 401(k)s that — where their taxes are deferred and they pay ordinary income taxes when they finally cash out.
If Obama really wanted to get the capital gains tax to produce more revenue, he would decrease it, not increase it. He tries to laugh this off by saying that rich people didn’t mind the 28% rate under Bill Clinton, but in fact they did. When Clinton finally lowered it from 28%, under pressure from the Republican Congress in 1997, investment capital tripled. The resultant economic expansion from 1998-2000 outperformed the three-year period after the 1993 tax increase by a full percentage point in average GDP. This lesson instructed the Bush administration in how to generate economic growth, leading to the further reduction in CGT rate in 2001, and the five-plus years of expansion that resulted from it after absorbing the economic damage of 9/11.
Furthermore, in this interview as in his debate answer, Obama never gives a really good reason to increase the CGT rate –except his nebulous issue of “fairness”. Once again, Obama doesn’t explain how an increased rate will generate increased revenues. It won’t; instead of selling off moderately-performing assets and taking the tax hit to invest in higher-risk, higher-potential investments, people will instead hold assets until the tax situation improves. That not only means less revenue as capital gains go unrealized, it means a lot less capital for new economic growth, which will help stall the economy.
Obama still displays no real comprehension of the dynamics of investment and tax policy, a shortcoming with real consequences in a President. He favors jacking up tax rates to redistribute capital from those who earn it to those who do not, and like others before him, he will find those gains elusive. If Democrats are to be believed that the economy has headed seriously south, what’s needed is massive incentive for investors, not another disincentive for capital to go into hiding.
That isn’t a gaffe in the normal sense, but it is a revelation about the kind of economic illiteracy we will see in an Obama administration.
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SouthernGent on April 27, 2008 at 4:35 PM
Just say NO to evil corporations and lower taxes.
Every liberal with a lack of understanding on how a 401K works will love it.
Kini on April 27, 2008 at 4:36 PM
As time goes on it becomes obvious that Obama is unwilling to take the time to really study issues of the utmost importance to most Americans. Cannot figure out if it’s laziness or dependence on others to do his thinking for him. Either way, it’s bad vibes for a man who would be Prez.
jeanie on April 27, 2008 at 4:43 PM
From those according to their abilities, to those according to their needs.
2theright on April 27, 2008 at 4:45 PM
Don’t we have the examples from the last half of the 20th century to demonstrate that income redistribution through taxation is a failed economic policy. Yet the left keep going back to that well. Something about not knowing history dooms one to repeat it. Can we send Barry and Shrillary back to school.
Mallard T. Drake on April 27, 2008 at 5:00 PM
Obumble:
I don’t care if it works, it just has to be fair!
Shakespeare:
Fair is foul, and foul is fair…
profitsbeard on April 27, 2008 at 5:00 PM
Here’s what the lefties fail to comprehend. OK, here’s one thing the lefties fail to comprehend. What’s the difference between 2% GDP growth and 3%? In 36 years, the 2% economy doubles while the 3% nearly triples. Our 13 trillion dollar economy is 26 trillion or it’s 37.5 trillion. That’s an additional 11.5 trillion dollars in wealth for our children and grandchildren.
The libs are so focused on “social justice” that they ignore what’s being divided just as long as it’s divided in a way that’s “fair”. To a liberal, rich people don’t deserve to be rich and poor people don’t deserve to be poor. No one is responsible for their own well being.
trubble on April 27, 2008 at 5:02 PM
Rich people are bad.
Rich people earn capital gains.
Taxes on capital gains should be raised.
Really, what more does Obama need to know?
Cicero43 on April 27, 2008 at 5:06 PM
Trubble, I think you have it half right. Rich Liberal people are just fine, so long as they vocally support the right causes. The Liberals have no heartburn if Michael Moore is a billionaire, so long as he continues to bash greedy republicans. Dennis Miller was cool, great even, until he decided to embrace the Conservative ideals, then he became someone who needed to be destroyed.
Liberals love hypocritical rich people, ones who fund the Obama campaign, and donate money to try and oust Conservatives.
Unfortunately, so does John McCain.
Snake307 on April 27, 2008 at 5:06 PM
I’m the founder of a technology startup and am in the process of trying to get venture funding. I want to employ about 100 people or so with good paying jobs, good benefits and a future. That is important to me. However, the sources of money for startup companies is hyper-sensitive to capital gains rates. Rates go up, available capital goes down and with that innovation and jobs. For the life of me I don’t see why Obama or any of the other candidates don’t look America in the eye and tell us that if we want to encourage innovation and job creation we need people and companies with money to put that money to work funding startup and expanding businesses.
DrDeano on April 27, 2008 at 5:11 PM
Given the three contenders, the best we can hope for is to hope the change won’t tax us all into poverty.
SeniorD on April 27, 2008 at 5:15 PM
Ah, well. At least it’s fair.
Who is John Galt?
Spc Steve on April 27, 2008 at 5:16 PM
I’m sorry Ed, are you pointing to the dot com bubble as your success story? Way to go.
I remember back when HotAir wasn’t “The Daily Obama.” Talk about yearning for the good old days.
e-pirate on April 27, 2008 at 5:19 PM
That’s right. But he knows a lot more about national security and foreign policy. :)
petefrt on April 27, 2008 at 5:20 PM
Ans he’s the foremost defender of Israel in the world today.
Cicero43 on April 27, 2008 at 5:23 PM
DrDeano, can I invest in your company?
cjs1943 on April 27, 2008 at 5:23 PM
He’s selling the idea that retirement accounts won’t be hurt by the increase in taxes because they are tax free/tax deferred. This is wrong because the assets in those accounts will be worth less because they are also worth less to taxable investors.
SocklessJoe on April 27, 2008 at 5:37 PM
Another politican deciding how much of our money he’s going to confiscate at the point of a gun. lousy crooks.
RMC1618 on April 27, 2008 at 5:50 PM
If snObama is elected (God forbid) look for a protracted real recession. The MSM will spin like a gyroscope to prove otherwise but it will be jimma carter misery index time……again.
jukin on April 27, 2008 at 5:52 PM
If liberals are so supportive of income redistribution to promote “fairness,” then why don’t they start at home? The Obamas made over $4 million last year. Surely a family of four doesn’t need that much money. Why don’t they take their “excess” income and donate it to some charity that serves the underprivileged? Why wait for some government tax policy to force them to do it?
A few years ago, Bill Clinton bitterly complained that Bush had not raised taxes on wealthy people like the Clintons and the Bushes, and that failure prevented Clinton from being able to financially support the troops. We now know the Clintons have made over $100 million since Bill left the WH. If Bill was so gung-ho about financially supporting our troops, then why didn’t he cut a $10 million check to the U.S. Treasury, the DOD, or some veterans’ charity? Are liberals incapable of voluntarily acting in accordance with their professed principles? They somehow can’t do what they say is right (e.g., redistribute “excess” income for fairness; provide funds to support the troops) unless some government tax policy forces them to do it? How does that make sense?
AZCoyote on April 27, 2008 at 5:54 PM
The Obama guy is a Marxist, plain and simple. Hasn’t a clue what capitalism and free markets are all about, he sees only the ‘class struggle’. Maybe he should ask his mentor preacher next time.
Where does he think companies get capital? Probably thinks it’s from government handouts.
At least Democrat Jimmy Carter played like he understood, but if this guy gets elected the economy will crash in 6 months.
tarpon on April 27, 2008 at 5:59 PM
I would really like to know what has compelled the MSM to suddenly begin doing their jobs in regards to being skeptical, rather than lovely-dovey, to Sen Obama? What has compelled the scrutiny? What changed, because Sen Clinton won Penn?I don’t think that’s the case but I can’t get into the mind of liberals too well without having to down about 3 shots of Jack to recollect myself.
What has changed?
Weebork on April 27, 2008 at 6:06 PM
I thought one of the more interesting parts of the interview was when he claimed his 2004 speech was the most patriotic speech given by anyone in memory.
So, according to him, he’s the biggest supporter of the Jews ever. He’s the biggest supporter of gays. He’s the only candidate to promise not to raise taxes on the middle class (probably ever!). And now he’s the most patriotic person on the planet since 2004!
Obama’s the greatest person on the planet, just ask him!
p0s3r on April 27, 2008 at 6:17 PM
I’m convinced he got to where he is by Affirmative Action…meaning, Gentleman C’s at Harvard in non-difficult classes.
But of course, they only do that for people like George Bush…
benrand on April 27, 2008 at 6:32 PM
pOs3r you forgot to add Hamas firmly supports Obamas rise to power.
AMartinez on April 27, 2008 at 6:39 PM
Good luck. I wish you all the success in the world.
aengus on April 27, 2008 at 6:39 PM
How much taxes dose two income families make??? a 2 income family in nor cal has to make more than 75 k a year and that makes then blue collar working class so is he saying he wants to tax blue collar working families more . I was more than able to make 80k a year when I was working as an ibew electrician in San Francisco. This was before I got hurt and can’t do that work anymore. Does this mean I was rich and needed to pay more in taxes? 80k living in SF isn’t rich hell its middle class , so he wants to raise the taxes on the middle class is what he is saying and what about small business owners ????
This guy is a bigger fraud then hilldabeast and I thought that was impossible.
I am sure he would have won iowa if he told the farmers he wanted to raiser there taxes. even white guilt wouldnt have helped him against raising taxes.
Mojack420 on April 27, 2008 at 6:43 PM
The protracted primary is forcing the candidates to say things they would never have said one of them had this thing clinched by now. See also: Hillary’s “nuke Iran” comment.
CHAOS!
kooly on April 27, 2008 at 6:44 PM
I keep asking what, exactly, is Obama’s forte? It seems to be speaking to stupid people, since there is no single political issue on which he is better than a complete imbecile.
His campaign keeps saying that they are going to “run on the economy”, which just makes me want to laugh. Could he possibly be so cynical as to believe that his blind-leading-the-retarded approach to domestic economic policy is a plus for him?
Jaibones on April 27, 2008 at 6:59 PM
I keep saying this because it is true. Obama thinks all of America is as stupid as they are in Chicago.
He’s finding out the hard way that not everyone is.
drjohn on April 27, 2008 at 7:07 PM
Obama is obviously clueless about macro-economics.
But he isn’t the only Presidential candidate that is completely clueless in that area.
LegendHasIt on April 27, 2008 at 7:10 PM
Hillary and Obama understand full well why the tax cuts work. Their democrat base doesn’t understand basic economics because students in our public education system are not getting educated in civics. Class warfare is much easier to teach than the constitution. So much for public education being for the common good.
Maybe Hillary will start defending the tax cuts now. Chaos indeed.
myamphibian on April 27, 2008 at 7:32 PM
I thought the most telling moment during the interview was when Obama claimed that increasing the capital gains tax wouldn’t affect people who had 401K plans…it would only affect the rich.
What an astounding display of ignorance!!! Where does he think the gains come from when people invest in Mutual Funds or companies within a 401K?? If capital gains are taxed away, ALL market investments will suffer, and the poor souls whose only retirement assets are their 401K’s will find them MUCH SMALLER and unable to sustain their retirement!
Every dime lost to capital gains taxes impacts every 401K whether the owner pays it directly or has it stolen directly from his custodial account by an Obama (or Obama-like) administration.
But Obama is willing to let all the “working class” people whose only lasting employment benefit is a 401K plan starve to death in retirement because somehow it isn’t fair??
landlines on April 27, 2008 at 7:52 PM
I remember back when HotAir wasn’t “The Daily Obama.” Talk about yearning for the good old days.
e-pirate on April 27, 2008 at 5:19 PM
Sunday = typical slow news day
Presidential election year = get to know the candidates
Total failure of the MSM to vett the Dem candidates = HA must
Care to tell us about the “good old days”…
Keemo on April 27, 2008 at 7:57 PM
Prediction: BHO is going to tap dance into office like Jimma Peanut, f-up because he has no experience, then blame Bush and Rove for his F-ups. The MSM is going to defend him until the end and anyone that challenges him is simply a racist.
Claypigeon on April 27, 2008 at 8:05 PM
Also, everyone who challenges McCain on anything wants Obama to be elected President.
aengus on April 27, 2008 at 8:13 PM
What a racist thing to say!!!! That B doesn’t stand for Bojangles!!
;-)
Besides, he won’t be doing much dancing of any kind after Hillary finishes kneecapping him.
:-)
(I’m kidding about that racist thing… But I’d bet that the members of Obama’s church and Revvrum Wright would try to make it a capital crime to use ‘tap-dance’ in any sentence where an ‘African American’ was mentioned.
LegendHasIt on April 27, 2008 at 8:20 PM
That should be sarcasm…. But I very much fear that it is not????
LegendHasIt on April 27, 2008 at 8:22 PM
Wright’s on TV at NAACP dinner raising Obama’s negatives by 10
lets dis McCain some more
windansea on April 27, 2008 at 8:28 PM
aengus, realistically the choices are limited at this point. You may not “want” him to win, but if Obama is the democrat nominee, the next president will be BHO or McCain. If someone defends McCain here, then he is labeled not a real conservative. There’s a fine line between disagreement and MDS. Is bitter a family value now?
myamphibian on April 27, 2008 at 8:31 PM
aengus – My apologies, sometimes I get confused as to who idolizes the guy, who isn’t thrilled, but OK with him, and who, like me, suffers from what others call MDS, but is, in actuality, realistic analysis of his character.
LegendHasIt on April 27, 2008 at 8:39 PM
He’s an idiot, pure and simple. He knows nothing about how the economy really works and only “feels” things and goes with it. Your standard liberal. Higher taxes feels fair, so lets do that.
Neo on April 27, 2008 at 9:00 PM
Come on, people. You know it’s racist to criticize Obama
’s knowledge of economics.misterpeasea on April 27, 2008 at 9:19 PM
I don’t think they are all stupid in Chicago. A lot of them are stupid, but more of them are racist and corrupt.
Jaibones on April 27, 2008 at 9:24 PM
Oh, yes, it is–and it has. The boomers are just entering the phase where they can cash in a portion of their retirement funds, and they are noticing that they are getting killed by the capital gains tax. No one minds so much the income tax; it’s the penalty for savings and investment that so rankles.
Note to Obama: it’s the older people, the investors with a stake in the nation’s prospertiy, who vote, not the MTV crowd.
PattyJ on April 27, 2008 at 9:32 PM
You hear on the news every so often that the U.S. has one of the lowest numbers of people who save money. With the capital gains tax, tax on interest earned on bank accounts, and the tax on dividends. It shouldn’t be a shock that American’s aren’t saving money.
I don’t want to think about withdrawing money from my 401-K in 30 years. If we have another Jimmah Carter or B.J. Clinton then, it will make retirement very expensive.
Mooseman on April 27, 2008 at 9:55 PM
There are levels where further tax cuts do not result in more revs. for instance if the tax rate is reduced to zero then tax rev would decrease to zero. The opposite is also true there are times when a tax increase will generate more tax rev. finding this elusive point is very hard because it floats with the underlying economy. Also is he talking about short term or long term capital gains? At the present short term capital gains are tax at the underlying income rate of the person. whereas long term is taxed less. If BHO raises the long term rate to say 28% without a coresponding increase in the short term CGT rate then you are settingthe masses up (those below the 28% income bracket) to become short term traders and not investors. If this is the case then it would become more profitable to sell your stocks before a year is up take the smaller tax hit and trade into the next high flying sector. You will in essense create bubble/crash after bubble/crash in the market. this would also be true for mutal funds. the turnover rate of mutal funds would skyrocket.
Another point not mentioned in the CGT rate is will the special div tax rate remain in force. this tax rate has seen more and more companies start to offer divs and larger div to their shareholders thereby increasing the wealth to the masses.
unseen on April 27, 2008 at 11:07 PM
landlines on April 27, 2008 at 7:52 PM
If BHO wins in Nov or even appears to be able to win I would suggest selling all stock, be it in a 401k or private account. the market will sell off.
unseen on April 27, 2008 at 11:12 PM
Does this mean I was rich and needed to pay more in taxes?
Mojack420 on April 27, 2008 at 6:43 PM
Why yes it does. Why? because BHO is a citizen of the world. Considering that a person making 20,000 is in the top 20% of the world’s wealthy the entire USA is just one big collection of filthy rich people that must pay their fair share of the global tax bill. why should Haiti or North Korea or Subshara Africa have to pay for their roads and dams and security. We can’t expect the poor to pay for basic services that would be immoral.
/scarm
unseen on April 27, 2008 at 11:18 PM
profitsbeard on April 27, 2008 at 5:00 PM
It was the best of times it was the worse of times.
It was the age of wisdom,
it was the age of foolishness,
it was the epoch of belief,
it was the epoch of incredulity,
it was the season of Light,
it was the season of Darkness,
it was the spring of hope,
it was the winter of despair…
We had everything before us,
we had nothing before us,
we were all going direct to Heaven,
we were all going direct the other way
Tale of two cities/ dickens…sums it up better IMO
unseen on April 27, 2008 at 11:27 PM
True, if you don’t count retirement savings.
Critics of the calculated savings rate, obtained by subtracting consumption from disposable income, point out that growth in value of owned assets, including retirement accounts and housing, is ignored in this statistic, as are employer contributions to retirement savings.
PattyJ on April 27, 2008 at 11:34 PM
True, if you don’t count retirement savings.
PattyJ on April 27, 2008 at 11:34 PM
Oh yes the beauty of math equations. you get out what you put in. All math can tell whatever story you want. want USa to be big spenders low savers. there’s an equation. Want them to be rapers of entire worlds there’s an equation for that. It’s too bad the MSM doesn’t know how to do math just headlines.
unseen on April 27, 2008 at 11:40 PM
“I’m mindful that we’ve got to keep our capital gains tax to a point where we can actually get more revenue”
It’s all they think about. What ever happend to ” We the people”, you know, the ones that have to pay the bills? Maybe someday, just maybe, folks will wake up. Then again, maybe not.
N4646W on April 28, 2008 at 1:34 AM
I have great sympathy for Mr. Obama on this issue because it reminds me of my freshman finance class. It helped me realize that I needed to pick a major that was more suited to my aptitude.
In the end it seems that he doesn’t quite have the acumen necessary for this whole Presidency thing. That’s OK, he can change his major. Maybe Women’s Studies or Multiculturalism. I hear those are very fun and don’t require much complex analysis.
Mormon Doc on April 28, 2008 at 2:25 AM
That’s an interesting observation.
When I did corporate taxes, all I know is that of all the cities in this country that I had to deal with, Chicago was the absolute worst, with all sorts of hidden corporate (’speed trap’) taxes. When it came to dealing with the taxing bureaucracy, one clearly got a sense of taxes levied to make money from businesses ‘because they could’ as well as providing made-up government jobs, with no true oversight or supervision, to satisfy some political base or IOU (that probably got the taxes put in place in the first place). From my recollection, Chicago is very much a tax the businesses into oblivion in order to give to the politicans (to dole out accordingly) kind of city. That is, a government job is something to which one aspires, one desires; it’s safe and requires little effort to keep. And this is the milieu from which Obama comes on his white horse, ‘Progressive’, to save us hicks and rubes from our bitter selves.
RickZ on April 28, 2008 at 6:59 AM
Has anyone noticed two things about Barack Obama and taxes?
1. Whatever happened to the $200,000 floor for tax increases the Dems were talking about not six months ago? (”We won’t raise taxes on anyone making less than $200,000 — this is just a tax the rich thing!”) Now, the floor for tax increases apparently has dropped to $75,000.
2. Obama proposed eliminating the ceiling on payroll tax (i.e. social security tax) contributions. Now, those taxes cut off at a certain income ($102k for this year) because social security is a retirement system, not a tax. But Obama has proposed ELIMINATING that ceiling, which effectively serves as a 13% marginal tax increase above $102,000. (Employers pay 50%).
I’m surprised those two pieces of Obama’s tax policy haven’t gotten much attention…
Outlander on April 28, 2008 at 7:33 AM
I emphasized part of the quote because IMO none of the politicians are willing to really endorse the idea of people building businesses.
One step further…Barry O’s illiteracy about real economics reflects his literacy of Marxist economic theory and inability, by omission or comission, to see its faults/failures.
Marxist and “liberal” thought on taxes are as coercive and punitive devices to force certain behaviors. The less economic growth, the more people on the dole, the more businesses depend on favors from the poltical class…the role of the state is enhanced.
People start making a lot of money, they buy cars and consume more, have aspirations to live in places other than high-density housing that government planners think they should. Soem figure out they can afford to have kids. Businesses form a more vital power bloc of power that can challenge the politicos.
Economic freedom breeds a lack of control over people to a statist, and then the elite running the state, directly or indirectly, are not able to supervise so well. People can pay for and decide to select their own doctors. It is really very messy from an eltist’s perspective and if the elitist is going to save the world and get the trains running on time…he tries to push things back into his comfort zone. The hubris hobbles those outside the elite so the elite are happier. How can we deny a superior being a happy day?
Marxist economics and politics, Barry’s ferevent belief and extensive education in them, fumbles completely to explain that the Bush tax cuts have significantly shifted income tax burden to higher income taxpayers and increased revenues, because that goal in Marxist terms can only be achieved by punitive taxation and/or a combination of nationalization of businesses by the state.
The Russian/Zimbabwean notion of equality…of misery. But Barry O, he will be doing fine, like Mugabe, who isn’t missing meals while much of his country starves. Whatever happens to us he, Michelle and the kids will get whatever they want. “Do as I say, not as I do”. A little subtler than Mike Bloomberg and your human right to self-defense, but no different in the end. John Edwards’ “two Americas”, but not quite as Edwards described it.
I think Obama (and Hillary) get a pass on this stuff because the MSM doesn’t understand the issues or how to read economic data, they support statism and due to their utter bigotry against business people…every CEO is a Ken Lay, they just haven’t been caught at it yet. That for every crook CEO there are maybe 2 politicians just has to be overlooked if the belief system is to remain intact.
This is also the legacy of “educators” like Ayres. Why do you think so many of that ilk went into education? It is a safe place to promote their ideas, not face consequences of starting a business and failing due to incompetence and bad thinking, etc. These people stopped learning real lessons long ago, and education is the only place they can survive and even win awards.
So Barry is a Senator, not a technology company CEO; poltics being the other place you can not learn and survive…
Harry Schell on April 28, 2008 at 10:51 AM
Harry Schell on April 28, 2008 at 10:51 AM
good post
unseen on April 28, 2008 at 12:58 PM
I lived in Chicago for over 15 year before taking a job overseas for a year (Iraq). When I’m done over here, I’m not going back to Chicago.
Besides being an openly anti-Republican city I often just overlooked the idiots and took advantage of the great things the city offered. Well, no more! Strogers new 11% County sales tax was the last straw.
I’m well above the “rich people” threshold that Obama refers to and instead of Cook Co. getting 9% of every penny I spend, they’re not going to get any. How’s this for an Economics lesson:
$250K x 9% = $22,500
ZERO x 11% = ZERO
JetBlast on April 28, 2008 at 2:59 PM
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