In a 2008 debate, Charlie Gibson asked Barack Obama about his support for raising capital-gains taxes, given the historical record of government losing net revenue as a result. Obama persevered: “Well, Charlie, what I’ve said is that I would look at raising the capital-gains tax for purposes of fairness.”
A most revealing window into our president’s political core: To impose a tax that actually impoverishes our communal bank account (the U.S. Treasury) is ridiculous. It is nothing but punitive. It benefits no one–not the rich, not the poor, not the government. For Obama, however, it brings fairness, which is priceless.
That was, indeed, a memorable moment–but not in the way that Krauthammer thinks. The real problem was that the question Charles Gibson asked was premised on a falsehood. As FAIR pointed out at the time, Gibson was
pressing Obama about his plan to raise capital gains tax rates to levels of the early 1990s–a position that struck Gibson as bizarre, since lowering these taxes increases government revenue:
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?
This question rests on two false assumptions. The capital gains tax is paid by a small percentage of the population. As Citizens for Tax Justice pointed out (3/16/06), “The wealthiest 10 percent of taxpayers enjoyed 90 percent of the capital gains eligible for this special tax break.” Gibson’s reference to the 100 million Americans who own stock is irrelevant, since this tax is applied to the sales of stocks and real estate–not the act of having a retirement account.
Gibson’s other point–“History shows that when you drop the capital gains tax, the revenues go up”–might be popular in certain conservative circles, but the evidence to support it is thin. As the Center on Budget and Policy Priorities pointed out (7/12/07), there is little causal relationship between the capital gains tax cuts and increased federal tax revenue. Economist Jason Furman of the Brookings Institution pointed out the the “Joint Committee on Taxation and Treasury both score raising capital gains taxes as raising revenues” (New Republic, 4/16/08).