The Wall Street Journal opines about the universal support for higher capital gains tax rates by the leading Democratic presidential candidates. Hillary is the “moderate,” seeking to raise the rate to 20 percent, while Obama and Edwards want a 28 percent rate. Yet as the WSJ explains, the capital gains tax is a perverse form of double taxation that ultimately hurts workers by reducing the amount of capital in the economy:
When it comes to taxes, Barack Obama is no Jack Kennedy. The Illinois Senator recently announced that he wants to raise the capital gains tax to restore “fairness” to the tax code. That makes it a three-peat: All of the leading Democratic contenders for President have endorsed higher taxes on stock ownership. Hillary Clinton is the “moderate” in that so far she’d merely raise the tax to 20% from the current 15% – a 33% increase. John Edwards and Mr. Obama want to nearly double it, to 28%. …roughly 52% of American adults own stock in some form, and last year 8.5 million of these investors paid a capital gains tax. The value of those assets will decline if capital gains taxes go up because financial markets instantly capitalize higher taxes on stock profits into lower stock prices. …Since we already tax corporate earnings at 35% through the corporate income tax, taxing those profits again when the stock is sold imposes a double tax on risk capital. That’s why 12 industrialized nations, including Hong Kong and Korea, impose a zero capital gains rate. …A study by former Treasury Department economist Gary Robbins has found that from 1946-1998, about 90% of the returns to capital investment accrued to workers in the form of higher wages, because when workers have more tools like computers, forklifts and robotic equipment, they produce more.