As discussed yesterday, the most important number in Obama’s budget is that the burden of government spending will be at least $2 trillion higher in 10 years if the President’s plan is enacted.

But there are also some very unsightly warts in the revenue portion of the President’s budget. Americans for Tax Reform has a good summary of the various tax hikes, most of which are based on punitive, class-warfare ideology.

In this post, I want to focus on the President’s proposals to increase both the capital gains tax rate and the tax rate on dividends.

Most of the discussion is focusing on the big increase in tax rates for 2013, particularly when you include the 3.8 tax on investment income that was part of Obamacare. If the President is successful, the tax on capital gains will climb from 15 percent this year to 23.8 percent next year, and the tax on dividends will skyrocket from 15 percent to 43.4 percent.

But these numbers understate the true burden because they don’t include the impact of double taxation, which exists when the government cycles some income through the tax code more than one time. As this chart illustrates, this means a much higher tax burden on income that is saved and invested.

The accounting firm of Ernst and Young just produced a report looking at actual tax rates on capital gains and dividends, once other layers of tax are included. The results are very sobering. The United States already has one of the most punitive tax regimes for saving and investment.

Looking at this first chart, it seems quite certain that we would have the worst system for dividends if Obama’s budget is enacted.

The good news, so to speak, is that we probably wouldn’t have the worst capital gains tax system if the President’s plan is enacted. I’m just guessing, but it looks like Italy (gee, what a role model) would still be higher.

Let’s now contemplate the potential impact of the President’s tax plan. I am dumbfounded that anybody could look at these charts and decide that America will be in better shape with higher tax rates on dividends and capital gains.

This isn’t just some abstract issue about competitiveness. As I explain in this video, every single economic theory – even Marxism and socialism – agrees that saving and investment are key for long-run growth and higher living standards.

So why is he doing this? I periodically run into people who are convinced that the President is deliberately trying to ruin the nation. I tell them this is nonsense and that there’s no reason to believe elaborate conspiracies.

President Obama is simply doing the same thing that President Bush did: Making bad decisions because of perceived short-run political advantage.

Today POLITICO Arena asks:

Was the House GOP decision to unlink deficit reduction and an extension of the payroll tax holiday a smart move, or does it undermine their deficit reduction message?

My response:

The House Republicans’ move to unlink deficit reduction and an extension of the payroll tax holiday is simply a bow to reality. They’ve learned from the first session of the 112th “Tea Party” Congress that any deficit reduction measures they’d make will go nowhere in the do-nothing Senate. As William McGurn details in this morning’s Wall Street Journal, the Harry Reid Senate hasn’t passed a budget resolution in three years and has never voted to extend the payroll tax cut for a full year—the administration’s No. 1 economic priority according to Vice President Biden.

So what’s the point of House Republicans conditioning an extension of the payroll tax holiday on a spending cut, only to be blamed, when the Senate balks, for wanting to raise taxes on the middle class? As long as there’s a do-nothing Senate, our deficits and debt will only grow.

Tonight HBO will broadcast “The Loving Story,” a documentary about Richard and Mildred Loving, the interracial couple whose marriage was banned by the state of Virginia and ultimately upheld by the Supreme Court in 1967.

Mildred Jeter, a black woman (though she also had Native American heritage and may have preferred to think of herself as Indian), married Richard Loving, a white man, in the District of Columbia in 1958. When they returned to their home in Caroline County, Virginia, they were arrested under Virginia’s anti-miscegenation statute, which dated to colonial times and had been reaffirmed in the Racial Integrity Act of 1924. The Lovings were indicted and pled guilty. They were sentenced to a year in jail; the state’s law didn’t just ban interracial marriage, it made such marriage a criminal offense. However, the trial judge suspended the sentence on the condition that they leave Virginia and not return together for 25 years. In his opinion, the judge stated:

Almighty God created the races white, black, yellow, malay, and red, and he placed them on separate continents. And but for the interference with his arrangement there would be no cause for such marriages. The fact that he separated the races shows that he did not intend for the races to mix.

Five years later they filed suit to have their conviction overturned. The case eventually reached the Supreme Court, which struck down Virginia’s law unanimously. Chief Justice Earl Warren wrote for the court,

The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men. Marriage is one of the “basic civil rights of man,” fundamental to our very existence and survival.

Here’s how ABC News reported the case on June 12, 1967:

Some people, of course, see parallels between Virginia’s ban on interracial marriage and its current ban (along with many other states) on same-sex marriage. One of them is Robert A. Levy, chairman of the Cato Institute. Joined by John Podesta, with whom he co-chairs the advisory committee of the American Foundation for Equal Rights, the nonprofit group that brought the Perry case against California’s Proposition 8, he wrote in the Washington Post in 2010:

Now, 43 years after Loving, the courts are once again grappling with denial of equal marriage rights — this time to gay couples. We believe that a society respectful of individual liberty must end this unequal treatment under the law….

Over more than two centuries, minorities in America have gradually experienced greater freedom and been subjected to fewer discriminatory laws. But that process unfolded with great difficulty.

As the country evolved, the meaning of one small word — “all” — has evolved as well. Our nation’s Founders reaffirmed in the Declaration of Independence the self-evident truth that “all Men are created equal,” and our Pledge of Allegiance concludes with the simple and definitive words “liberty and justice for all.” Still, we have struggled mightily since our independence, often through our courts, to ensure that liberty and justice is truly available to all Americans.

Thanks to the genius of our Framers, who separated power among three branches of government, our courts have been able to take the lead — standing up to enforce equal protection, as demanded by the Constitution — even when the executive and legislative branches, and often the public as well, were unwilling to confront wrongful discrimination.

But tonight you don’t have to worry about contemporary issues. Just enjoy “The Loving Story,” a story about two people who loved each other and whose marriage eventually led to an advance for the American principle of equal liberty under the law.