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April 21, 2008

Barack Obama’s Bitter Tax Hike


It used to be the case, once upon a time, that Democrats supported tax increases because they sincerely believed, however incorrectly, that higher tax rates would always lead to higher tax revenues for the government.


Now, that's fine. Even though anyone who has taken an economics class understands that the government's tax revenues start decreasing once you raise tax rates beyond a certain percentage (because people would have less incentive to engage in taxable business), and even though more money for the government isn't necessarily a worthy goal, we can at least respect the fact that liberals have wanted to increase tax rates in order to, according to them, bring in more money for the government.


But at the Democratic debate Wednesday night, Barack Obama admitted the unimaginable.


You see, in the 1980s, the capital gains tax, which is a tax on profits realized from the sale of assets such as stocks, was raised to 28 percent. Although the tax rate was increased, the amount of money the government made from the capital gains tax decreased, because people were less likely to trade in stocks when their potential profits were reduced by taxes. Consistently, when Bill Clinton agreed to reduce this tax rate to 20 percent, the government indeed had increased revenue, because the tax cut encouraged more trading, and thus, more profits. When President Bush cut the rate further to 15 percent, revenues increased again.


On Wednesday, these facts were launched at Barack Obama by one of the debate moderators, Charles Gibson.


Gibson asked: “Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent . . . And George Bush has taken it down to 15 percent . . . 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?”


Obama’s response: “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 . . . (I) 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.”


There are so many astounding elements to this exchange that it is not even clear where to begin.


First, the fact that a debate moderator on ABC actually pointed out the fact that decreasing tax rates could increase tax revenues, a fact normally collectively shunned by the liberal media, is quite respectable and, due to our low expectations, even quite impressive.


Second, Obama’s admission that his programs, including expanded health care, are not “free” also appears to be a shocking revelation to his followers.


But in Obama’s response was also a truly and thoroughly disturbing exposure of his beliefs that should not go unnoticed by anyone intending to cast a ballot in this election.


Since we know that raising the capital gains tax to 28 percent would have two effects – increasing the tax burden on the 100 million Americans who own stock, and decreasing revenue for the government – we know that it is thus a lose-lose proposition both for taxpayers, who have to pay more, and for proponents of big government, who have less money for the government to spend.


If no one derives any benefit at all from raising the rate to 28 percent, why does Obama wants to do so?


His answer: Because it will hurt the rich, and that’s more “fair.”


That’s right. Obama is willing to raise a tax applicable to people of all degrees of wealth, and willing to let the government make less money to pay for his programs, for the sole reason that the tax might hurt the rich more than anyone else. And never mind that it will make it more difficult to finance his “health care” and “education” visions that he mentioned in his answers.


In other words, Barack Obama would rather embrace the social cost of imposing the high tax, which hurts everyone and slows down the economy, rather than see everyone get ahead at different speeds.


It is like saying you would rather not send your three children to college at all than have one of them get into the Ivy League and the other two merely attend second-tier schools. There are so many words for this disquieting mentality, but “hopeful” is not one of them. Perhaps “bitterness” is.


© 2008 North Star Writers Group. May not be republished without permission.


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