In God We Trust

Hillary Clinton's Latest Plan Would Ruin U.S. Economy

 

IBDEditorials.com

Fiscal Policy: Hillary Clinton, sounding a populist note, says that she wants to raise tax rates on capital gains. That would be a job-destroying disaster for both the middle class and the poor she pretends to care about.

The details aren't all in, but it's clear Clinton wants higher taxes on capital gains as a kind of two-fer — a tax hike on the "rich" to give more money to Big Government, and more votes to her and other "inequality" warriors on the left.

An unnamed "campaign official" told the Wall Street Journal that Clinton seeks at least three new rates on capital gains, which would change based on how long a person holds the investment.

The upshot is it's a cap-gains tax hike: "The Clinton rate .. .would be higher than the 28% President Barack Obama proposed earlier this year for the highest earners," the article says, adding she may even raise the tax rate on capital gains to the same rate as regular income.

This will be sold, no doubt, on "fairness." But raising the rates on cap-gains taxes won't make our economy fairer; it will make it far less so. And it will make investment decisions more costly and complex to boot.

Start with a simple fact: Most investments are made with money that's already been taxed both at the corporate and personal level. So capital gains taxes really represent double or even triple taxation. That's unfair.

Clinton's plan is based on the idea that "short-termism" — corporations and investors focusing on the near term rather than the long term — is an evil, wreaking havoc on markets and creating volatility.

But any company that doesn't focus on quarterly results and relentless innovation in today's high-tech, digital economy is foolish — and likely to disappear. Investors channel capital to market winners, and we're all better for it. Clinton doesn't seem to understand this.

Nor does she understand that bad government policies — like higher tax rates, taxpayer bailouts for entire industries, piling up trillions of dollars in debt and putting left-wing bureaucrats in charge of Wall Street, to name just a few — are the real sources of market volatility and uncertainty. Not "short-termism."

Truth is, the U.S. already has one of the world's highest capital gains tax rates. In OECD nations, they averaged a little over 18% last year; in the U.S., the rate was 28.7%, or 58% higher.

Ironically, the so-called "Clinton boom" of the 1990s began after Hillary's husband signed a Republican measure to cut capital gains taxes. The economy took off.

Why is this important? Economic growth comes from capital. More capital means more businesses, better equipment, more jobs, higher incomes, faster economic growth and, ultimately, higher standards of living for all — including the poor and middle class.

A 2010 study by economist Allen Sinai supports this, finding a cap-gains tax hike "reduces growth in real GDP... (and) lowers employment and productivity."

It's an economic truism: When you raise taxes on anything you get less of it. Hillary Clinton's plan to hike taxes on capital is a recipe for fewer jobs, more income inequality, lower incomes and economic stagnation.

Haven't we already had that?