Obama's Call for Raising Taxes on Capital Ignores Comonsense Economics
By Lawrence Kudlow
It's too easy to label President Obama's State of the Union as more tax-the-rich and redistribution. We know that. Rather than name-calling, Republicans must draw a clear line in the sand between their worldview and Obama's. I'd call that line commonsense economics.
First, you can't create a new business or sustain an existing one without the seed corn and nourishment of capital investment.
Second, only businesses create jobs. You can't have a job without a business.
Third, jobs create all incomes, including middle-class incomes.
Fourth, incomes create family and consumer spending.
OK? This is not complicated. It's common economic sense.
University of Chicago economist Casey Mulligan states this in a simpler way: Growth starts with investment and ends with consumer spending.
Regrettably, Obama doesn't get this. That's why he's proposing the third capital-gains tax hike of his tenure. He started at 15 percent, went to 20, with Obamacare took it to 23.8, and now wants 28 percent. This damages business, jobs, and middle-class incomes.
Ironically, history shows that lower capital-gains tax rates produce higher revenues.
Obama also proposes to raise the tax burden on capital by increasing inheritance and estate taxes. And he's making another attempt to tax banks — only this time he is adding in asset managers and insurance companies. Ironically, a huge part of Obama's base — police officers, firefighters, teachers — might suffer a serious depreciation of pension-fund stockholdings.
So, taxing capital will hurt the very middle-class workers and incomes Obama claims he wants to help. His so-called middle-class economics doesn't work.
A related point: Obama's SOTU made no mention of cutting corporate tax rates. Instead the president trashed the top 1 percent and slammed companies for keeping profits abroad and using unfair loopholes and deductions.
So there's a lesson here for congressional Republicans and some of my fellow conservatives: Do not get sucked into this class-war politics. You will never outbid the Democrats on middle-class benefits.
Former CEA chair Glenn Hubbard argues that "free community college, an enhanced tax credit for child care and higher taxes on high-income earners and large financial institutions" will not generate "growth, work and opportunity."
Good advice, Republicans.