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Stuck on 'Fairness'


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stuck-on-fairnessAmerican Spectator:

"If you make more than $1 million a year, you should not pay less than 30 percent in taxes," asserted President Obama in his State of the Union speech.

For those with predominantly investment income, that would effectively double their capital gains tax rate from the current 15 percent rate, producing a triple negative impact on U.S. economic growth and job creation by reducing the incentive for domestic investment, increasing the incentive to move more jobs and capital overseas, and directly reducing the amount of capital available in the private sector by way of greater transfers of income to the government.

It's not hard to understand the disincentives to job creation in Mr. Obama's proposal. If the government wants more people to quit smoking, it increases taxes on cigarettes. Similarly, if the government wants more people to quit investing, the appropriate policy is an increase in taxes on investment income. And if the government really wants to kill job creation and new investment, it should double the tax on capital gains.

So where's the common sense in this call for more roadblocks to investment, more disincentives for the financing of companies and start-ups in the private sector, when 12.8 million Americans by the government's calculations are already out of work, and millions more aren't counted as unemployed because they've given up looking for work and left the work force, and millions more are working at reduced pays or reduced hours.

Currently, over 10 million part-timers are looking for full-time employment and can't find it. None are included in the government's unemployment number.

Add it all up and the current jobless rate is 17 percent, double the official unemployment rate of 8.3 percent.Scissors-32x32.png

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As a second postscript, the unending criticism of the 15 percent tax rate on long-term capital gains ignores that taxpayers are required to pay capital gains taxes on illusionary gains because the income is not indexed for inflation. If inflation, for instance, totaled 50 percent over the period of the investment, the 15 percent tax rate on capital gains is really a 30 percent tax rate on the real, inflation adjusted, gain -- and that's not counting state taxes or the double taxation that occurs on investments by way of the corporate income tax.




The answer, it seems, is that President Obama is stuck on "fairness," so much so that he gives short shrift to any negative consequences that will predictably flow from his repeated attempts to produce more economic leveling, more redistribution of wealth and income, and more "shared sacrifice."

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