Turns out, at least according to Larry Kudlow, that Barack Obama may be moving back to the center to embrace Supply Side policies!
Kudlow claims that "Team Obama is moving toward the supply-side and pivoting toward the political center on key aspects of its tax policy. Writing in Thursday’s Wall Street Journal, Obama advisors Jason Furman and Austan Goolsbee outlined a plan that would only raise tax rates on capital-gains and dividends from 15 percent to 20 percent for individuals making more than $200,000 and on family incomes above $250,000. Prior to this, investors worried that Obama would double the 15 percent tax rate on cap-gains and bring the 15 percent rate on dividends back to 40 percent."
Kudlow claims that "Team Obama is moving toward the supply-side and pivoting toward the political center on key aspects of its tax policy. Writing in Thursday’s Wall Street Journal, Obama advisors Jason Furman and Austan Goolsbee outlined a plan that would only raise tax rates on capital-gains and dividends from 15 percent to 20 percent for individuals making more than $200,000 and on family incomes above $250,000. Prior to this, investors worried that Obama would double the 15 percent tax rate on cap-gains and bring the 15 percent rate on dividends back to 40 percent."
Of course, Kudlow rightly isn’t thrilled about the Capital gains hike at all, as he notes, “Obama’s 20 percent rate on investment, investors would suffer a 6 percent incentive loss on their cap-gain incomes and another 5.5 percent incentive drop on dividends. The cost of capital would rise under Obama and investment returns would decline by more than 11 percent. Uncle Sam will keep more and investors will retain less, all while the economy is languishing.”
Kudlow also notes that “the Obama people acknowledge at least some effects from supply-side incentives. And perhaps they are implicitly recognizing the likelihood that higher tax rates on cap-gains and dividends will generate lower revenues and a higher budget deficit.
"It also seems clear that the Obama tax plan is not a growth policy, but a social policy that uses tax fairness as a means of redistributing income. There’s a long history of failed redistributionism, and this is where the Obama plan falls apart.”
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Adding, “Plus, the world’s changed since the 1990s. The flat-tax revolution coming out of Eastern Europe has slashed marginal rates on individuals and corporations, resulting in strong growth and big revenue gains that keep budget deficits down."
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Still, as Larry Kudlow says, “Team Obama’s small shift toward the supply-side remains a positive development.”
