By Ralph R. Reiland
We raise taxes on things we want to discourage, like cigarettes.
President Obama's proposal to increase taxes on capital gains and dividends is a clear formula for a higher cost of capital, just as higher taxes on cigarettes produce a higher price for Marlboros.
A higher cost of capital means less capital will be employed and fewer jobs. The result is less output, less income and larger government deficits as fewer tax dollars flow into government coffers.
So why the push by Obama to raise taxes on dividends and capital gains when the consequence is more unemployment in the private sector and lower federal revenues to pay for his agenda of expansionist government?
"Obama is willing to trade losses in jobs and wages to advance his political ideology for tax fairness," contends J.D. Foster, Ph.D., a senior fellow in fiscal policy economics at The Heritage Foundation. "The president is intentionally sacrificing jobs in the pursuit of his own notions of fairness with little or no hope of increasing revenues in the process."
Obama's goal is to soak "the rich" in the pursuit of "fairness," even though the top 10 percent of U.S. households already provide 70 percent of the total revenues collected via the federal income tax.
The objective, as candidate Obama explained to Joe the Plumber, Joe Wurzelbacher, is economic leveling via the redistribution of income and wealth.
"I think when you spread the wealth around, it's good for everybody," Obama told Wurzelbacher.
Andy Roth, vice president for government affairs at the Club for Growth, a Washington-based organization that advocates economic freedom and limited government as the means to economic growth and prosperity, provided a translation of Obama's comment to Wurzelbacher: "He's perfectly happy to destroy wealth as long as he can redistribute it."
Taxes on capital gains and dividends should be higher, for "fairness," even if this results in less investment, lower growth, more joblessness, smaller revenues for the government and more federal debt, according to Obama, as revealed during a presidential debate in his exchange with moderator Charlie Gibson regarding his proposal to increase the tax on capital gains from 15 percent to 28 percent.
"In each instance when the rate dropped, revenues from the tax increased -- the government took in more money," said Gibson. "And in the 1980s when the tax was increased to 28 percent, the revenues went down. So why raise it at all, given the fact that 100 million people in this country own stock and would be affected?"
Replied Obama, "Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness."
Our problem, in other words, is "the rich," not any lack of investments or shortage of inventiveness. It's a lesson that the Rev. Jeremiah Wright preached to Obama at the Trinity United Church of Christ in Chicago.
In his autobiography, "Dreams from My Father," Obama quotes a sermon by Wright that he says brought him to tears. A small boy sitting nearby in church handed him a tissue.
We're in a world, bellowed Wright, "where cruise ships throw away more food in a day than most residents of Port-au-Prince see in a year, where white folks' greed runs a world in need."
They're hungry in Haiti, in other words, because of those big buffets on cruise ships. They're poor in Port-au-Prince because of white folks' greed, not because of Papa Doc and Baby Doc