I’ll bet you didn’t know that cutting the capital gains tax or the death tax is “racist.”
Believe it or not, that’s the latest contention by the Biden administration, which seems to view every policy issue through the prism of not what’s best for the American economy but race and victimhood.
In a new report, “Advancing Equity through Tax Reform,” the Biden Treasury Department examined stock and home ownership in America by race.
The study concludes lower tax rates on capital gains income “disproportionately benefited White families relative to Black, Hispanic, and other racial/ethnic groups.”
It found more than 90% of the benefits went to whites.
Why does the government need to know the race or ethnicity of who owns stock or businesses or homes?
The answer is obvious: The Biden administration is resorting to a blatant race-baiting argument so it can raise wealth and capital gains taxes in the name of “equity.”
Yet there are two good reasons why we’ve traditionally kept tax rates on investment low.
The first: Every time we’ve lowered the capital gains or corporate tax, we’ve seen a burst of investment, which helps everyone.
Just listen to John F. Kennedy, who endorsed a preferential tax rate on capital gains while president by declaring: “The tax on capital gains directly affects investment decisions. . . . the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.”
The second reason: A lower tax on capital gains is not a “giveaway” to the rich because taxes on investment income are levied not just once, but multiple times, via corporate income tax, the small-business pass-through tax, the dividend tax and even the death tax.
The Treasury study calculated that roughly two-thirds of white households own stock, but only 39% of blacks do, and 28% of Hispanics, to suggest lowering capital-gains taxes mostly benefits whites. (The Treasury conveniently omits stock owned by much larger numbers of Americans in pension and 401k plans.)
If so, though, let’s try to expand minority ownership.
That’s a worthy policy goal, allowing more Americans to become workers and owners.
And one way to achieve that would be to reduce the tax on investment and savings.
Another would be to allow young Americans of all races to put the 10% to 12% of their paychecks that now disappears into the black hole of the Social Security system into a personal 401k Own America account invested in an index fund of all stocks.
This plan would drive stock ownership in America up to perhaps 80% or 90%.
Many of the ownership disparities would then disappear.
Under this plan, the typical young black or Hispanic worker could accumulate millions of dollars of wealth over their working years and have much higher retirement benefits.
We would become a nation of worker-owners.
Yet Democrats strongly oppose such a share-the-wealth plan.
Instead, the Biden administration proposes to nearly double the capital-gains rate to 44% and introduce a new tax on unrealized capital gains.
This would raise the tax on the returns from stock ownership to well over 50%. How in the world would a higher tax on ownership expand minority ownership?
Recall that if you tax something you get less of it — which is why we tax cigarettes to get people to stop smoking.
Do we really want to encourage people to stop investing?
The Biden plan would deter blacks and Hispanics from becoming owners by making ownership more expensive and the reward lower.
Indeed, this scheme would only concentrate more of the wealth in the hands of the already rich, while making most of the rest of Americans — especially blacks and Hispanics — poorer and more dependent on government.
Sounds pretty racist to me.
Stephen Moore is a visiting fellow with the Heritage Foundation and a cofounder of the Committee to Unleash Prosperity.