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The Dubious Case Against Obama's Capital Gains Tax Hike

Rich Lowry has a worthwhile column about the stupidity of McCain's plan to "turn the page" on the financial crisis. But, along the way, he hints at a somewhat mystifying point I've heard from a handful of conservatives lately (and the McCain campaign itself):

McCain needs more focus on the economy rather than less. He has to brand Obama as a job-killer, whose promised tax increases, plans for $1 trillion in new spending and protectionism make him unfit to forge the nation’s economic recovery. Obama himself has implicitly acknowledged the harmfulness of his capital-gains tax increases by saying he might not impose them if the economy’s still sputtering. [Emphasis added.]

Sure, a capital gains tax increase on people making over $250,000 could discourage in investment in principle. But, as I'm constantly reminded by friends who work in finance, no one has been losing the slightest wink of sleep in recent weeks over the capital gains tax--because almost everyone is taking capital losses. You almost get a "we should be so lucky as to pay capital gains taxes" vibe from Wall Street these days.

Substantively, Obama should not be in a defensive crouch over this proposal. Though you could see how mau-mauing him over it would be effective...

--Noam Scheiber