Obama: Huge Capital Gains Tax Increase Needed
Monday, March 31, 2008 2:01 p.m. EDT
Citing advice from the sage of Omaha, Warren Buffet, Democratic presidential contender Sen. Barack Obama (Ill.) has called for a massive increase in the capital gains tax.
No word from the billionaire investor Buffett in reaction to Obama’s policy proposal — aired first on MSNBC by the Democratic presidential contender in an interview with Maria Bariromo – but many other investors are already responding. Currently, the capital gains tax rate is 15 percent.
"When I talk to people like Warren Buffet, or others, and I ask them, you know, how much of a difference is it going to be if it’s 20 or 25 percent, they say, ‘Look, if it’s within that range then it’s not going to distort, I think, economic decision making,” said Obama in an interview on March 27 on CNBC’s Closing Bell program.
Sen. Obama, who also favors letting the Bush income tax cuts expire in 2010, added that he would not like the capital gains tax rate to go up to "confiscatory rates.”
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"I certainly would not go above what existed under Bill Clinton, which was the 28 percent. . . my guess would be it would be significantly lower than that. I think that we can have a capital gains rate that is higher than 15 percent,” said Sen. Obama.
Some economists tell MoneyNews that it is not a wise tax policy decision to raise capital gains tax rates in the middle of an economic downturn and possibly a recession.
"I think it's a fairytale to tell people that appreciably raising taxes on voluntary investment activities would not have an effect in the market. Or course it would,” Matthew Conrad, managing director of Complete Wealth Management, Orange, Calif., tells MoneyNews.
Conrad, who is a licensed CPA, does not believe that Obama would stop at 25 percent for a cap gains tax, however. He thinks it could go much higher to"65 percent. That would sure distort my economic decision making, and that of my clients.”
Also taking on Obama is the Republican National Committee (RNC), which issued a statement quoting several financial experts, including Martin Sosnoff, chairman and founder of Atlanta/Sosnoff Capital, The Tax Foundation's Scott Hodge, and the U.S. Congressional Joint Committee On Taxation, which indicated that "higher tax rates for capital gains and dividends are bound to dampen the stock market.”
But, Obama seems confident that an increase in capital gains rates will do much to help an economy in crisis.
"What it will also do is first of all help out the federal Treasury, which is running a credit card up with the bank of China and other countries,” said Obama. "What it will also do, I think, is allow us to make investments in basic scientific research, in infrastructure, in broadband lines, in green energy and will allow us to give some relief to middle class and working class families who have been driving this economy as consumers but have been doing it through credit cards and home equity loans. They're not going to be able to do that.”
