A day in politics is like a year of normal life, they say; and never has this been proven more vividly than in this year's presidential race. Books could be filled (and doubtless will be) detailing all the bizarre upsets, reverses, surprises, untimely deaths and startling resurrections, and it's far from over yet.
In times like these, it's easy not to notice the small shocks. But sometimes, small revelations can have the biggest consequences.
One such subtle startler can be found in Barack Obama's call for increasing capital gains taxes. He's mentioned this plan many times on the campaign trail.
There's nothing the least bit unusual in a Democrat calling for higher taxes; it'd be newsworthy if a Democrat called for citizens to be allowed to keep more of their own money. Capital gains taxes are always a favorite target: as their name implies, they are on increases of capital, which is considered to be owned by rich people. What do Democrats stand for, if not "soak the rich" or "tax big corporations"?
No, the surprising thing isn't the tax increase itself, but the reason Mr. Obama gave why he wants to increase it. ABC's Charlie Gibson addressed this issue at the Democratic debate in Philadelphia. Here's the transcript:
MR. GIBSON: You have however said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton, which was 28 percent." It's now 15 percent. That's almost a doubling if you went to 28 percent. But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent.
SENATOR OBAMA: Right.
MR. GIBSON: And George Bush has taken it down to 15 percent.
SENATOR OBAMA: Right.
So far, so ordinary. Barack Obama wants to double the capital gains tax, placing it 50% higher than the legislation Bill Clinton signed to lower it. Obama has always set himself to the left of the Clintons and particularly much farther left than Slick Willie himself. The truly astounding part comes next:
MR. GIBSON: And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
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...
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. [emphasis added]
Here we see the difference between someone who is ignorant and someone who is insane.
Normal Democrats want to raise taxes so they can get more money to spend on their beloved social programs. Raising taxes very seldom gives the government any more money; as economist Arthur Laffer conclusively proved decades ago, once taxes reach a certain point, increasing them causes the actual dollar amounts collected to go down. This is called the Laffer Curve.
There are many reasons this takes place: if tax rates are too high, people will decide not to work harder because they keep so little of the extra they earn, or they will move their investments into tax shelters such as municipal bonds instead of more productive corporate stocks. This is especially true of taxes on capital: it's kind of hard to get around paying higher income taxes if you are an ordinary wage slave, but capitalists can trivially move their capital offshore, into shelters, or anywhere else to avoid excess taxes.
Both Ronald Reagan and George W. Bush used this insight to good effect, lowering tax rates (over vehement Democratic opposition) but reaping increased revenues as the economy boomed. Congressional Democrats have long refused to acknowledge the truth of the Laffer Curve; they continue to claim, in spite of all the evidence, that the way to get more money for the government is to continually raise taxes. They are being straightforward - fundamentally wrong, but honest about their intentions at least.
Barack Obama is a completely different bird. Let's read his statement again:
Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.
Unlike his fellow Democrats, he apparently understands the Laffer Curve. He knows that raising the capital gains tax rates will not give the government any more actual cash; quite the opposite, such a move will cost the government money.
But he doesn't care. In effect, he wants to spend government money (through lower tax revenues) for the express purpose of making rich people poorer, on account of fairness. He wants to destroy wealth.
Not redistribute wealth; not take from the rich and give to the poor; just simply to make wealth vanish. "I can't have it; I don't want you to have it; so I'll make sure you can't keep it, even though taking it from you doesn't benefit me a bit."
What sort of person sets out to intentionally destroy wealth for no other reason or benefit than the vague perception of "fairness"? We can't all be rich, so we'll just make the rich poor like us? Not since Karl Marx have we heard such naked jealousy.
The boom-times of the 80s and 90s proved Reagan's saying, "A rising tide lifts all boats." Barack Obama doesn't like seeing the rich men's yachts floating high and mighty; he wants to pull the plug just to see the yachts run aground. The fact that all the rowboats and ducky-floats of the poor will run aground just as badly bothers him not in the least: we'll all be on the rocks together. He's finally found a change we can all believe in: equality in poverty.
The capital-gains tax does not apply just to the wealthy. It applies to anyone that buys something, and sells it later for a higher price.
Such as, say, anyone with a house? Right now, many Americans are suffering with falling home values; in theory, we want prices to rise instead. And when they do, Mr. Obama will be right there with his hand out to confiscate an even bigger portion of the gain than previously.
Need we mention that capital gains calculations have never been indexed for inflation and that the prices of everything are going up just at the moment? So what will happen is that people will wind up paying cash for taxes on gains that, thanks to inflation, don't even exist. But that doesn't bother Barack Obama; it's all about fairness, not reality, sanity, or paying the government's bills.
Let's have Bill Clinton back. At least he knew how to count.