While Republican presidential candidates offer innovative policy prescriptions for, among other things, economic growth, improving education, reducing poverty and reforming entitlement programs so they don’t bankrupt our children, Hillary Clinton blathers on about , the need for , and the faux travesty of .
But perhaps Clinton’s worst old idea (so far) is her proposal for a massive increase in the capital gains tax rate for upper-income earners, supposedly for the purpose of countering “short-term” thinking by corporations and investors.
Clinton’s robotic pandering to the envy-fueled Democratic base is odd politics, bad economics, and ignorant of history — including the history of her husband’s biggest economic success.
It should also frighten Coloradans who are seeing so much growth and prosperity due to the entrepreneurial energies of start-ups and expanding businesses, particularly in high-tech fields that require risk-taking investors willing to take a chance on new ideas.
Politically, Clinton’s tax-hike proposal is odd because it targets only people in roughly the top 0.75 percent of earners, individuals earning over $413,200 and couples earning over $464,850. Clinton is trying to appeal to those Democrats whose sensibilities lean more toward the class warfare of Sens. Bernie Sanders or Elizabeth Warren while not excessively offending her well-heeled supporters on Wall Street, in Silicon Valley, and kicking up some sand in the Hamptons.
But she’s accomplishing neither goal. The restless left doesn’t understand why she wouldn’t penalize the success of those earning $200,000; after all, as President Obama put it, at some point Her moneyed supporters will eventually tire of her painting them as the arteries into which government leeches should sink their teeth. And the ordinary American spends even less time thinking about capital gains tax rates than about climate change.
Economically, her proposal is nonsensical. Bloomberg describes it as “adding complexity.” That’s an understatement, given that Clinton’s plan creates six capital gains tax brackets for those in the top tax bracket.
Raising capital gains tax rates and holding periods reduces the willingness of investors to exit profitable investments and enter other ventures, including funding the sorts of start-up businesses and expansions that are providing an incredible engine of growth in Colorado. It’s called the “lock-in effect” and it is one of the most damaging aspects of capital gains taxes, with the extent of the harm being proportional to the tax rate and the holding period, both of which Clinton wants to increase.
As authors David Butler and Linda Tischler put it in their 2015 book, “Design to Grow,” “Colorado , in order to create the kind of innovation ecosystem we associate with Silicon Valley but on a much bigger scale. It seems to be working: In 2013, a study indicated that, in Colorado, a new startup launches every 72 hours.”
Clinton’s proposal is a dagger aimed at the heart of our state’s increasing prosperity.
Even The New York Times says that Clinton’s capital gains gambit is “more show horse than work horse,” that it “slides over some important institutional details about how people invest,” and that it won’t begin to accomplish her stated goals.
Strangest of all, Clinton’s plan demonstrates ignorance of the success of her husband, following his agreeing (under Republican pressure) to cut the capital gains tax rate from 28 percent to 20 percent in the Taxpayer Relief Act of 1997. Following the pro-growth Bill Clinton tax cut, the stock market rallied, employment soared, and — contrary to the — that it allowed President Clinton to preside over the first federal budget surplus in a generation.
“Progressive” politicians, including the leftward-moving Hillary Clinton, offer us anything but progress. Their ideas are old, tired, and the source of repeated, persistent, predictable failure. Her recent policy proposals — particularly her ill-conceived plan to target the capital gains of the “rich” — won’t help her politically but would greatly harm the rest of us economically. A rapidly growing entrepreneurial Colorado is particularly vulnerable.
Ross Kaminsky is host of “The Ross Kaminsky Show” on Saturday mornings on 850 KOA.
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