“what’s happening on Wall Street and how business is going”
Senator Obama did not comport himself well on the issue of the capital gains tax in the recent debate. WSJ:
“Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20%,” said Mr. Gibson. “And George Bush has taken it down to 15%. And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?”
Mr. Obama answered by citing rich hedge fund managers. Raising the capital gains tax is necessary, he said, “to make sure…that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools. And you can’t do that for free.”
But Mr. Gibson had noted that higher rates yield less revenue. So the news anchor tried again: “But history shows that when you drop the capital gains tax, the revenues go up?” Mr. Obama responded that this “might happen or it might not. It depends on what’s happening on Wall Street and how business is going.”
The response of Senator Obama about the impact of capital gains rate reductions (“might happen or it might not. It depends on what’s happening on Wall Street and how business is going”) might make for an interesting trading day on November 5, 2008 if he is elected President.