Obama mentioned he wanted to raise Capital Gains from its current 15% to 20-25%.
consider this:
First, the capital gains tax is usually thought of as a "rich man's tax." After all, only capitalists have capital gains, right? That was mostly true in the 1930s, when capital gains were first treated differently from other kinds of income. It's not true today, when over half of American households own financial securities. The vast majority of capital gains taxpayers today are solidly middle class. In 2005, 47 percent of households paying capital gains taxes had incomes below $50,000, and 79 percent, almost four out of five, had incomes under $100,000.
Second, Obama has said an increase in capital gains taxes would increase federal revenues, but when the tax was raised in 1986, from 20 to 28 percent, tax receipts went down, not up. People just stopped realizing capital gains. When Bill Clinton signed a reduction in the tax rate into law in 1997, however, receipts soared. They soared again after 2003, when the tax was further cut to 15 percent. Capital gains tax receipts actually doubled in the next three years.
Third, stock prices are determined by the market's best guess as to future earnings. If you raise the capital gains tax you inescapably lower the possible future earnings on all stocks. So what happens? The market goes down. A capital gains tax hike is a perfect way to cause a bear market, or make one worse.
Fourth, in a globalized economy, a capital gains tax increase would discourage investment in the US from abroad, where capital gains taxes are often lower.
