The Candidates and Capital Gains Taxes

By April 17, 2008Taxation

Useful inquiry by Charlie Gibson yesterday in the ABC Democratic presidential debate, asking Sen. Obama and Sen. Clinton if they would increase the capital gains tax rate, noting that previous cuts in the rate had produced more revenue. (Relevant portion of the transcript here.) Senator Obama reaffirmed previous statements saying he could support an increase from the current 15 percent to 28 percent.

OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.

We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.

And for Sen. Clinton:

GIBSON: I’m going to go to commercial break. But I just want to come back because of one thing you said. And I want to be clear, the question was about capital gains tax. Would you say, no, I’m not going to raise capital gains taxes?

CLINTON: I wouldn’t raise it above the 20 percent, if I raised it at all. I would not raise it above what it was during the Clinton administration.

GIBSON: If I raised it at all. Would you propose an increase in the capital gains tax?

CLINTON: You know, Charlie, I’m going to have to look and see what the revenue situation is.

Neither addressed the basic point, that cutting the capital gains tax increases investment AND government revenues.

Elsewhere, Larry Kudlow interviewed Sen. John McCain on Tuesday. (Transcript.) Capital gains did not come up. Here’s his campaign’s statement on the issue:

Reward Saving, Investment and Risk-Taking: Low taxes on dividends and capital gains promote saving, channel investment dollars to innovative, high-value uses and not wasteful financial planning. John McCain will keep the current rates on dividends and capital gains and fight anti-growth efforts by Democrats.

UPDATE (3:30 p.m. Friday): Wall Street Journal editorial, “Obama’s Tax Evasion” recounts the debate exchange.

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