Capital Punishment

Capital Punishment


By INVESTOR'S BUSINESS DAILY | Posted Friday, October 24, 2008 4:20 PM PT

Tax Policy: Democratic nominee Barack Obama touts his tax plan as just a way to "spread the wealth." But to us it looks like something quite different: a declaration of war on capital.

Obama has described his plan to hike taxes as "neighborliness," "patriotism" and "justice." In fact, it's the widest-ranging assault on capital — and those who create it — in at least a generation, possibly longer.

Look at just a few of the things he and congressional Democrats have in mind: Higher taxes on successful entrepreneurs (anyone earning over $250,000), higher taxes on capital gains, higher taxes on dividends, a possible raid on Americans' 401(k)s, a takeover of America's private health care industry, strict new limits on what CEOs can make, and the reimposition of the death tax.

Add it up, and Obama will usher in a new era in America — one where capital, the engine of our economic growth and success, is punished severely through the tax code. If Democrats win a filibuster-proof majority in Congress, it'll be the only form of capital punishment their party will support.

Obama denies this, but listen to Barney Frank, head of the House Financial Services Committee, who said just last week: "I believe later on, there should be tax increases. . . there are a lot of very rich people out there whom we can tax at a point down the road and recover some of this money."

And all this in the middle of what looks like a deep recession. This is a big reason why stock markets in the U.S. and abroad have plunged in recent weeks. As Obama climbs in the polls, investors have awakened to a stark fiscal reality.

This should worry all Americans. A 2005 study found 57 million U.S. households — 60% of the total — owned stocks, bonds or mutual funds. Average people don't realize they'll take a direct hit.

Higher taxes lower returns on capital. This means everything — wages, stock prices, real estate — will have to decline further as Obama's tax hikes take hold. That means fewer jobs.

This reverses what has always been America's recipe for success: an economy built on low taxes, few regulations, free trade and, in general, letting markets decide winners and losers.

Obama says he's merely "spreading the wealth" — taking money from those who've earned it and giving it to those who haven't. But we already "spread the wealth." According to economists Gerald Prante and Andrew Chamberlain, the top 40% of households redistribute $1 trillion each year through the tax code to the bottom 60%. And yes, that includes the middle class.

By the way, the top 5% of earners — those squarely in Obama's tax-hike cross hairs — already pay 60% of all taxes. Obama's changes would skew that further.

Worse, many of Obama's "get the rich" tax hikes are really targeted at successful small businesses that create nearly 90% of all U.S. jobs. Among tax filers with adjusted gross incomes of $200,000 or more, some 67% report small-business income.

At this delicate time in our economic history, talk of tax hikes on wealth creators and capital is irresponsible — a recipe for the kind of market meltdowns we've seen repeatedly in recent weeks.

Spread the wealth? More like, destroy it.