Over the last several weeks, Progressive-Democratic Party Presidential candidate hopeful Rahm Emanuel has been publishing sections of his campaign platform in The Wall Street Journal. His latest installment is here. Emanuel talks a good game, but as Long Time Reader might expect, I have thoughts on it.
The carried-interest rule suggests that those in the business of buying and selling companies need the incentive of a special tax break. They don’t.
This is a conveniently plausible assertion, but it’s wholly unsubstantiated. Let Emanuel supply the facts and logic underlying his claim.
To be effective, reforms will need to work hand in hand with an enforceable international floor.
Absolutely not. Such a move gives foreign governments too much influence over our domestic economic policies. The only legitimate “international floor” needs no enforcement mechanism; the floor is however low individual nations let their domestic tax policies go and stay competitive. Progressive-Democrats spend ‘way too much time and energy trying to limit competition.
[R]aise the capital-gains rate closer to the rate that prevailed during the late 1980s, when it was the same as the tax on ordinary income. … You can’t claim that narrowing the gap between passive income and earned income would undermine the incentive to invest when we saw robust growth in exactly those conditions.
Yes, I can. Emanuel first needs to prove–or at least provide evidence–that the growth under those conditions would not have been even more robust had that gap not been narrowed. Showing a counterfactual is hard, but Emanuel isn’t even trying.
[E]liminate the stepped-up basis that allows them to pass fortunes from one generation to the next free from capital-gains taxes. This policy has nothing to do with driving economic growth and serves only to preserve inherited wealth.
Contra Emanuel, there’s nothing wrong with a family preserving its wealth. Aside from that, it’s not for Government, or for Progressive-Democrats who want to run Government, to dictate to the rest of us the proper way to handle our wealth.
It’s instructive, too, that Emanuel is not proposing even working toward a single low (in the range, I suggest, of 10-15%) tax on all income regardless of source (viz., those capital gains), with no deductions, credits, subsidies, loopholes, or other froo-froo.
In that environment, private-equity fund managers, firefighters, police officers, and teachers–and Warren Buffet and his (ex-?) secretary–all would be paying the same rates, with the rich still having their bigger bills.