Obama on the Capital Gains Tax

I just came across this article that clarifies Obama's widely misinterpreted views on the capital gains tax. (Fox News and CNBC have both falsely characterized Obama's plan as an across-the-board capital gains tax hike to 28%-30%, which is simply not true.) According to the ABC News blog post, he plans on raising the capital gains tax from 15% to 20% on those making $250,000 or more per year. As far as I'm aware, the long-term rate will be unchanged. In this case, the rate on capital gains exercised within a year of the original investment will increase to 20%, but only for those making over $250,000.

For the record, I'm not a huge fan of this policy. Although the effects of raising taxes are not always clear-cut, a higher rate can cause both a reluctance to invest capital--which can stunt economic growth and job creation--as well as a tendency to stick with under-performing investments to avoid pay the higher capital gains rate. These phenomena may also cause tax revenue from the capital gains to go down, even with a higher short-term capital gains tax rate. (Keep in mind that this capital gains tax is voluntary and that it is only paid when a person decides to sell an investment.)

I'll leave you with a video of Obama fielding a question during a debate with Hillary Clinton in which he was asked about a comment made to CNBC's Maria Bartiromo, saying he would certainly not raise it above 28%. Keep in mind that he has since clarified his position on capital gains tax and proposes a hike up to a maximum of 20%.