Saturday, January 24, 2015

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.

Larry Kudlow is CNBC's Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity.

7 comments:

  1. yeh let's not tax capital

    right

    let's let the rich get richer and more powerful and more manipulative and more bloodthirsty

    good idea

    i've watched peasant farmers rise from "poverty" - ie owning their own land, owning their own produce, trading with neighbors, salting away for a rainy day, working with neighbors to balance out hard times

    to where they have all lost their land

    to the rentier class that then employs them back on minimal wages


    frankly, stripping the rich of their capital and investing it in things like education, infrastructure etc might not be the most efficient way to deploy resources but it sure as hell beats what's happening now

    i think you right wing types better wake up to what's waiting around the corner for you

    build yourself into a gated community, bar your windows, load up on APBs, go for it

    ever thought to read history?

    p

    ReplyDelete
    Replies
    1. "to where they have all lost their land

      to the rentier class"

      how did they lose their land to rentiers if as you put it, they were "owning their own land"?

      The only way that seems to happen in the US is if the gov't gets involved and takes it.

      Delete
    2. "frankly, stripping the rich of their capital and investing it in things like education, infrastructure etc might not be the most efficient way to deploy resources but it sure as hell beats what's happening now"

      Aren't you making a selfish value judgment here? One might as well argue selfishly from the (alleged) rich bastards' point of view that the poor need to be eradicated from the face of the earth to reduce overall misery and suffering - maybe a healthy dose of faulty polio vaccines would do the trick?

      See, poet, problem solved!! Like magic, no?

      You don't even understand the problem properly. You have not defined the constraints on the solution space. It's too early for you to start proposing solutions.

      Delete
    3. ""frankly, stripping the rich of their capital and investing it in things like education, infrastructure etc might not be the most efficient way to deploy resources but it sure as hell beats what's happening now""

      LOL! If this moronic and completely ignorant post doesn't smell of either sheer envy or complete ignorance of economics don't know what does. Pal, use you're tiny little brain for two seconds and take an Econ101 class. It's available at the simple click of a mouse button. And trust me, it's not hard.

      Delete
    4. I think it's funny when people accuse others of being ignorant of history when it's obvious that they've probably never read a history book that wasn't assigned to them.

      Delete
    5. Re: The Peak Oil Poet,

      --"let's let the rich get richer and more powerful and more manipulative and more bloodthirsty"--

      Jeff Bezos and Oprah Winfrey are such vampires, aren't they, P?

      --" i've watched peasant farmers rise from "poverty" - ie owning their own land, owning their own produce, trading with neighbors, salting away for a rainy day, working with neighbors to balance out hard times "--

      Oh, I saw that movie, too. It was the Seventh Seal by Ingmar Bergman.

      Or what were you talking about?

      Delete
    6. Re: The Peak Oil Poet,

      --" stripping the rich of their capital and investing it in things like education, infrastructure etc might not be the most efficient way to deploy resources but it sure as hell beats what's happening now "--

      Why then not go for the most efficient way to deploy those resources rather than settling for second-best? If, as you imply, there are even MORE efficient ways to spend money, why not try them? Get more bang out of the stolen loot?

      Delete