We raise taxes on things we want to discourage, like cigarettes.
President Obama's proposal to increase taxes on capital gains and dividends is a clear formula for a higher cost of capital, just as higher taxes on cigarettes produce a higher price for Marlboros.
A higher cost of capital means less capital will be employed and fewer jobs. The result is less output, less income and larger government deficits as fewer tax dollars flow into government coffers.
So why the push by Obama to raise taxes on dividends and capital gains when the consequence is more unemployment in the private sector and lower federal revenues to pay for his agenda of expansionist government?
"Obama is willing to trade losses in jobs and wages to advance his political ideology for tax fairness," contends J.D. Foster, Ph.D., a senior fellow in fiscal policy economics at The Heritage Foundation. "The president is intentionally sacrificing jobs in the pursuit of his own notions of fairness with little or no hope of increasing revenues in the process."
Obama's goal is to soak "the rich" in the pursuit of "fairness," even though the top 10 percent of U.S. households already provide 70 percent of the total revenues collected via the federal income tax.
The objective, as candidate Obama explained to Joe the Plumber, Joe Wurzelbacher, is economic leveling via the redistribution of income and wealth.
Who would have thunk it?