We have gone month after month without Hillary Clinton saying much of anything other than the usual ideological positions designed to endear her to the Democrat far left. We hear about income and gender inequality without any proposed remedies. Last week we got Hillary's big economic speech that could best be summarized as Hillary saying "I would be good for the economy. Trust me." In other words, there was no content in the speech. Now, however, we are getting more, and it is quite disturbing.
The Hillary campaign is leaking a proposal from Mrs. Clinton regarding capital gains taxation. It is published in an article in the Wall Street Journal. Of course, in typical Clinton style, it is not a proposal, but rather a trial balloon. Hillary is floating the idea in the media to see how it is received.
Here's the gist of the idea: capital gains tax rates will be raised drastically. The American tax system has had a reduced tax rate for long term capital gains for at least the last 70 years. Originally, an investment had to be held for a minimum of six months to qualify as long term, but that holding period was raised two decades back to one year. The tax rate for long term capital gains was kept lower in order to encourage investment, the life blood of economic growth. It was lowered to 15% by Bill Clinton in an effort to promote growth; and that cut was successful. The 15% rate stayed in place until two years ago when president Obama got the top rate raised to just over 23% for those with the highest income. The one year holding period, however, was not changed. Hillary now wants to increase the holding period to at least three years before there is any tax reduction and to extend the time for a full reduction to something much longer.
This is a terrible idea. It is as if Hillary's economic team went out to find the worst possible tax move for economic growth and came up with this. We need to start from one key fact: investment in the economy is perhaps the single most important factor in achieving economic growth. The more the investment, the more the growth. During the Obama years, growth in our economy has stagnated and the American people have paid the price in lowered incomes. The government needs to promote investment if we are to start growing again. Hillary's tax plan hurts growth in two ways. First, it will discourage some people from making investments because the after tax returns will be lowered. Obviously, not all people or businesses that make investments look at capital gains tax rates as determining their decisions, but that is not the point. Some investors do look at things in that manner, and those people and businesses will be less likely to invest. On the other hand, there will not be anyone who will rush in to invest because the tax rates are going higher. The net of some loss and no gain is a reduction in investment and a slowing of growth. Second, the proposed change will undermine investment in our stock markets. America has the world's biggest financial system; it attracts hundreds of billions or even trillions of dollars from foreign investors. If foreign investors suddenly face higher taxes on the profits of their investments, they will put their money elsewhere. They can invest in London or Tokyo or Shanghai in non-American companies. Hillary's tax move would drive enormous amounts of cash away from our markets. That move would mean that the total cash available for investment in the USA would get cut in a major way. Reducing investment would reduce growth. Hillary's proposal would also undermine the stock markets themselves and would lead to a reduction in employment there. In other words, not only would Hillary's tax move hurt the American economy as a whole, but it would be a terrible blow to the New York City economy where the financial industry is centered.
The truth is that this trial balloon from Hillary shows just how ignorant she is about economics. It is a proposal that brings great costs for the economy with essentially no benefits. Indeed, it would not likely even raise government revenue despite the higher tax rates.
The Hillary campaign is leaking a proposal from Mrs. Clinton regarding capital gains taxation. It is published in an article in the Wall Street Journal. Of course, in typical Clinton style, it is not a proposal, but rather a trial balloon. Hillary is floating the idea in the media to see how it is received.
Here's the gist of the idea: capital gains tax rates will be raised drastically. The American tax system has had a reduced tax rate for long term capital gains for at least the last 70 years. Originally, an investment had to be held for a minimum of six months to qualify as long term, but that holding period was raised two decades back to one year. The tax rate for long term capital gains was kept lower in order to encourage investment, the life blood of economic growth. It was lowered to 15% by Bill Clinton in an effort to promote growth; and that cut was successful. The 15% rate stayed in place until two years ago when president Obama got the top rate raised to just over 23% for those with the highest income. The one year holding period, however, was not changed. Hillary now wants to increase the holding period to at least three years before there is any tax reduction and to extend the time for a full reduction to something much longer.
This is a terrible idea. It is as if Hillary's economic team went out to find the worst possible tax move for economic growth and came up with this. We need to start from one key fact: investment in the economy is perhaps the single most important factor in achieving economic growth. The more the investment, the more the growth. During the Obama years, growth in our economy has stagnated and the American people have paid the price in lowered incomes. The government needs to promote investment if we are to start growing again. Hillary's tax plan hurts growth in two ways. First, it will discourage some people from making investments because the after tax returns will be lowered. Obviously, not all people or businesses that make investments look at capital gains tax rates as determining their decisions, but that is not the point. Some investors do look at things in that manner, and those people and businesses will be less likely to invest. On the other hand, there will not be anyone who will rush in to invest because the tax rates are going higher. The net of some loss and no gain is a reduction in investment and a slowing of growth. Second, the proposed change will undermine investment in our stock markets. America has the world's biggest financial system; it attracts hundreds of billions or even trillions of dollars from foreign investors. If foreign investors suddenly face higher taxes on the profits of their investments, they will put their money elsewhere. They can invest in London or Tokyo or Shanghai in non-American companies. Hillary's tax move would drive enormous amounts of cash away from our markets. That move would mean that the total cash available for investment in the USA would get cut in a major way. Reducing investment would reduce growth. Hillary's proposal would also undermine the stock markets themselves and would lead to a reduction in employment there. In other words, not only would Hillary's tax move hurt the American economy as a whole, but it would be a terrible blow to the New York City economy where the financial industry is centered.
The truth is that this trial balloon from Hillary shows just how ignorant she is about economics. It is a proposal that brings great costs for the economy with essentially no benefits. Indeed, it would not likely even raise government revenue despite the higher tax rates.
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