On Thursday, Hugh Hewitt played some clips of Barrack Obama, including one about his desire to raise the Capital Gains tax (At ~31:00). Obama tried to brush it aside as a "phony argument" by saying that it wouldn't affect regular folks, since their 401ks aren't subject to the Capital Gains tax upon withdrawal, and that only the wealthy who own stock will be affected, and besides they "can afford to pay a little bit more".
This whole argument shows great ignorance about the reality of how the market works, and follows the normal liberal economic delusions.
First, not just the wealthy own stocks in this country Mr. Obama. I am hardly wealthy, but I own stock outside of my retirement vehicles.
Second, those regular folk who have IRAs and 401ks *will* be affected by this tax hike. Not by paying the taxes, but by suffering the market losses that will occur when this plan is passed. Not to mention the wider effect on the overall economy.
What do you think is going to happen between the time legislation is introduced and it would receive the signature of the President (no matter whom)? The market is going to drop. Individuals, corporations, investment houses, etc are all going to lock in gains that they have on their stock positions at the lower tax rate. This will have the overall effect of causing the market to go down.
In fact, yesterday on Hugh's show Larry Kudlow said this had already happened. The days following what appeared to be Obama's sewing up of the Democratic nomination, the markets were chattering about his tax plans, and the market dropped. Listen here (~10:25).
Now I am a big believer in the markets, and know that even if this were to happen, they would come back over the long term. But if Obama wants 'middle class people' to prosper, then he should not mess with the Capital Gains tax. It will hurt the market and people's portfolios in the short to mid-term, and discount all future earnings for the long term.
If he really wants to raise more tax money, then perhaps he should consider lowering the Capital Gains rate....
Please Barack, leave well enough alone....