Will Democrat tax hikes jeopardize the retirement portfolios of millions of middle-income Americans.?

. Washington’s ‘War Against Winners’ A cap-gains assault on private partnerships would strike a dagger into the heart of U.S. capital formation. Last Friday’s precipitous stock-market plunge, with the Dow Jones dropping 185 points, is all about Washington’s continued war on prosperity. The latest assault comes courtesy of House Democrat Sander Levin. Late last week, he introduced a bill that essentially would abolish the 15 percent capital-gains tax preference for risk investing, and raise it by 20 percentage points to the 35 percent corporate and personal rate. This goes beyond an earlier tax attack on a public offering by the Blackstone Group, and would slam into all private partnerships, including buyout funds, hedge funds, venture-capital firms, real estate partnerships, and oil-and-gas deals. Incidentally, while attacking capital gains, the congressional Democrats are killing initiatives for across-the-board cuts on wasteful appropriation bills. According to the Club for Growth, House Democrats defeated separate measures that would cut spending by 4 percent, 1 percent, and 0.5 percent. Does this mean the Democrats favor tax hikes over real spending control? It appears so. Washington economist Kevin Hassett says this is part of the Democrats’ “war against winners,” and he’s right on the money. In particular, these willy-nilly changes of the tax rules would have a chilling effect on capital formation, and could constitute the biggest attack on capital since the 1930s. As mentioned, the lightning rod in this tax-hike endeavor was the Blackstone Group, the private-equity giant that went public last week. Blackstone’s investment-fund profits are taxed at the 15 percent cap-gains rate, and since these profits come from high-risk investments, that’s how it should be. But Democrats in Congress view these profits as plain income, and greedily want a higher take. But plain ol’ income this is not. The recent crack up of two Bear Stearns sub-prime-mortgage hedge funds shows just how risky these ventures can be. Yes, there’s big money to be made when these private partnerships click. But the economy at large also is a beneficiary. Private buyout funds often save highly troubled companies from bankruptcy. They insert skilled managers who streamline operations and make businesses more efficient, a process that can ultimately lead to greater profits and business expansion. You know a lot of these companies: Chrysler, Staples, Sears, Domino’s, Dunkin’ Donuts, Toys“R”Us, Clear Channel Communications, Hospital Corporation of America. All of these firms were brought back from the dead thanks to private partnerships. Nobody knows for sure whether Congress will green-light the Democrats’ anti-growth agenda. The hope is that President Bush will veto any tax hike that lands on his desk. But the mere threat that Congress would embark on such a program of wealth destruction and economic impoverishment — all in the name of taxing “rich people” — has investors reeling. Ironically, a lot of today’s anti-cap-gains momentum is the handiwork of former Clinton Treasury secretary Robert Rubin. He actually believes a low cap-gains tax has no economic growth impact at all. However, back when Clinton and Rubin were running things, the personal income-tax rate was lifted from 31 to 40 percent, while the cap-gains tax was reduced from 28 to 20 percent, making for a 20 percentage point tax advantage for cap-gains over regular income. Flashing forward, the current Bush administration lowered the income-tax rate to 35 percent and the cap-gains rate to 15 percent, preserving that 20 percent differential. Hmm . . . Is Rubin saying the cap-gains tax advantage was good for the Clinton boom, but not the Bush boom? Truth is, that differential provides a strong incentive for entrepreneurial risk taking and higher-risk, cutting-edge investment — both of which lend real torque to the economy. Another unfortunate irony is that while Democrats think they’re striking out at the rich, they’re actually jeopardizing the retirement portfolios of millions of middle-income Americans. Firemen, police officers, and teachers, to name a few, are all represented by the big state and city pension funds. And these funds are heavily invested in the hedge and private-equity funds that the Democratic tax machine is targeting. Is this fact lost on the Democrats? And don’t they realize that two out of every three voters in recent elections owned stocks — either directly or indirectly? Are they attempting to commit political suicide? If the Democrats get their way, job creation will be adversely affected, too. Clearly, you can’t create new jobs in the private sector unless there’s a new or expanding business to create those jobs. And since new and expanding businesses require capital for investment funding, if you tax that capital more, you get less investment and fewer jobs. In short, you can’t have capitalism without capital. The process works for “rich people” and the middle class. Whenever Democrats wage war against the rich, the middle class becomes the collateral damage. This may be the law of unintended consequences, but it is something this Congress fails to understand. . ________________________________________

Public Comments

1. no one will answer this stupid selfserving nonsence! Post it on fox news!
2. If you can get off your soap box long enough to read my response you will find I agree with you.
3. Boy! I really wanted to answer that question, but I think its been done already... Definitely agree with at least one portion: Assault on " investors" is not attacking the " rich"....There are very few pension funds anymore and Social Security is a joke....so workplace 401's and personal IRA's are the "FUTURE" for MOST Americans....GEEEZ !! I pay income tax, property tax, tax on every single thing I buy....PLEASE, PLEASE..leave my damned FUTURE alone. The very rich will hire accountants to reduce any increases. The only people hurt by increasing taxes on dividends and cap gains are the working/saving class. .... and...it won't be "political suicide"..because the Dems convince a lot of people ( through massive political spending) that they are " going after" the evil rich. Many poor suckers out there ( with the 401's and IRA's) don't even REALIZE that they will end up the biggest targets. SAD
4. I think you might have already answered your own question, so why are you asking us? Do you want to know if we agree with you? I personally do not exactly agree. The greatest growth occurred in the U S during a time when taxes on the rich were relatively high, about 90% if I recall correctly. There was a time when the tax code was used to redistribute the wealth of the nation more or less. With 1% of the population owning 90% of the wealth, there is not a lot of potential for continued growth, only potential for a society of very rich and very poor. It is more of a society associated with those of the middle east rather than the democrocies that GWB is trying to pedal on the world. As an example for the world the U S currently is falling short in more categories than this one.
5. To answer this question I must say yes. Hillary Clinton has all ready stated she would tax the assets in pension plans. That disturbs me greatly, however I doubt she can pull it off. Too many Americans particularly baby boomers have too much clout to allow this robbery! It only stands to reason that increasing taxes on capital gains would only result in a loss of investment. Congress understands one thing taxes are used to buy peoples votes. Not just Democrats but Republicans as well.