Krauthammer, the Real Obama and a Fake Question

Charles Krauthammer‘s column today in the Washington Post (“Return of the Real Obama,” 9/23/11) reveals the Barack Obama, who’s apparently been hidden away for the past few years:

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).

About Peter Hart

Activism Director and and Co-producer of CounterSpinPeter Hart is the activism director at FAIR. He writes for FAIR's magazine Extra! and is also a co-host and producer of FAIR's syndicated radio show CounterSpin. He is the author of The Oh Really? Factor: Unspinning Fox News Channel's Bill O'Reilly (Seven Stories Press, 2003). Hart has been interviewed by a number of media outlets, including NBC Nightly News, Fox News Channel's O'Reilly Factor, the Los Angeles Times, Newsday and the Associated Press. He has also appeared on Showtime and in the movie Outfoxed. Follow Peter on Twitter at @peterfhart.