How to Destroy an Economy, Tip #37,865: Adopt Hillary’s Capital-Gains Tax Plan

Image: Shannon Stapleton/Reuters

(H/T Robert Wenzel)

Hillary’s Inconceivably Stupid Capital-Gains Tax Scheme

By Larry Kudlow

The weakest areas in the weakest recovery since World War II are investment in new plants and equipment and investment in new business startups. These are the biggest job-creators, and their slump is a key reason for the subpar labor recovery, with low participation rates and an increase in involuntarily part-time workers.

So if investment is the problem, what does Hillary Clinton go out and do? She proposes jacking up the tax on investment. It’s almost inconceivably stupid.

In her latest economic speech, Clinton proposes doubling the capital-gains tax rate on the profit made from asset sales (stocks, bonds, real estate) held a day less than one year up to two years. Right now, if you take a capital gain a day more than one year, you are taxed at a 20 percent rate. Actually, it’s 23.8 percent when you include the health-care surtax. So under Clinton’s brilliant new play, you’d be taxed at 43.4 percent — the top individual capital-gains rate of 39.6 percent plus the 3.8 percent Obamacare surtax.

That means instead of keeping 80 cents on the additional dollar of profit, you’d only keep 56.6 cents — a 30-percentage-point reduction in the take-home-pay reward for taking an extra dollar’s investment risk.

This will create a tall barrier to investment — what we don’t need. If you tax something more, you get less of it.

Clinton complains about too much “short-termism” in the economy. But her program might well create more of it. That’s because she has a sliding tax-rate scale, whereby assets held two to three years would be taxed at 39.8 percent and assets held three to four years at 35.8 percent. And you don’t get back to the statutory 20 percent capital-gains rate unless you hold an asset for six or more years.

Who’s going to lock themselves into that? What if new investment opportunities arise? Want to convert your current holding into cash so you can invest in your brother-in-law’s start-up? Maybe it’s the next Facebook. Who knows? The point is, the Clinton plan exacts a huge tax penalty on the movement from old capital to new.

The late Jude Wanniski called this re-oxygenating the economy. Ms. Clinton would snuff that out. Her short-termism fear will lock us into long-term economic stagnation.

By the way, the numbers are actually worse, because capital gains are already taxed as corporate profits. What investors pay is a double tax.

So let’s go back to Hillary’s top cap-gains rate of 43.8 percent. The government takes 35 percent of your profit in corporate taxes, leaving 65 cents to be taxed a second time as capital gains at the new 43.8 percent rate. That results in a take-home profit of 37 cents on the dollar.

Is that enough to reward the risk of investing in the next Uber? Except for Mayor Bill de Blasio, who hates Uber, most people would say no.

But that’s Hillary’s plan.

How powerful is the capital-gains tax? The nonpartisan Tax Foundation rates it among the top three economic-growth influences on the economy, along with full cash expensing for new investment in plants and equipment and the corporate tax. And compared with the rest of the world, the U.S. has fallen far behind in terms of this investment-tax-penalty grouping.

This is government tinkering at its worst. The reality is that Hillary Clinton is attempting to punish success and redistribute income.

Did someone say “tax the rich”? Clinton proposes an income threshold of $484,850 for married couples filing jointly. Oh, my gosh! Successful economic activists! Let’s get ’em!

Ironically, history shows that periods of higher capital-gains tax rates produce less revenue as a share of all federal revenue and as a fraction of GDP. Hillary’s not even redistributing efficiently.

And then there’s what some call the “Charlie Gibson effect.” Gibson interviewed then-Senator Obama in 2008 for ABC News. Obama said he’d raise the capital-gains tax from 15 percent to 28 percent. But Gibson reminded Obama that when Bill Clinton and George W. Bush lowered capital-gains tax rates, revenues actually increased. In other words, the Laffer curve. But Obama said it didn’t matter because he wanted to be “fair.”

It also doesn’t matter to Hillary Clinton. She wants to beat Bernie Sanders, or at least cuddle up to the Vermont socialist. What nonsense. Bad economics and bad politics. Voters will understand this.

Goofy ideas like this make me yearn for a 15 percent flat-tax rate on everything. Personal income, corporate profits, capital gains, dividends — everything. But that still leaves me with a double-tax problem for investment and savings. So it’s probably time to blow up the corporate-tax code altogether. That would get us to the 4-percent-plus growth path advocated by some of the Republicans on the campaign trail.

And that would get us some “long-termism” economic growth — just what the country yearns for.

Larry Kudlow is CNBC’s Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity.

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Elitist Bilderberg Confab Gears Up for 2015

The secretive annual Bilderberg gathering of more than 100 of the world’s most powerful people is on the heels of the much more public G7 summit. This year’s location is at Telfs-Buchen in Austria.

The Interalpen Hotel in Austria, location of the 2015 Bilderberg meeting.

Charlie Skelton reports:

Forget the G7 summit – Bilderberg is where the big guns go

Covering issues from Europe to terrorism and IT, the lesser known Bilderberg policy conference includes prime ministers, CEOs from banks, airlines, oil and the arms industry, and even George Osborne

As one summit closes, another opens. Thursday sees the start of the influential Bilderberg policy conference, which this year is being held in Austria, just 16 miles south of the G7 summit, and in a similarly inaccessible luxury alpine resort.The participant list for the conference has just been released by the organisation, and some big names leap off the page.

No fewer than three serving European prime ministers will be attending, from the Netherlands, Finland and Belgium. They will be discussing “European strategy” with the head of Nato, Jens Stoltenberg, and the president of Austria, Heinz Fischer. Two European finance ministers are on the list: one Dutch, the other George Osborne. The UK chancellor is a regular attendee of the Bilderberg summit, and this year he will be showing off his post-election glow. Unlike that other Bilderberg regular, Ed Balls, who is being invited back despite having by some considerable distance the weakest job title on the list: “former shadow chancellor of the exchequer.

Europe’s hottest financial potato, Greece, is on the conference agenda, and it’s good to know Benoît Coeuré, a member of the executive board of the European Central Bank, will be there to discuss it in strictest privacy with interested parties, such as the heads of Deutsche Bank, Lazard, Banco Santander and HSBC.

The scandal-hit HSBC and everyone’s favourite vampire squid, Goldman Sachs, are both extremely well represented at this year’s conference. HSBC in particular by its chairman, its busy chief legal officer, and board member Rona Fairhead, who is also on the board of PepsiCo and chair of the BBC Trust. Good to know the BBC is in such safe hands.

Other financial luminaries on the list include the vice-chairman of BlackRock, the CEO of JP Morgan Asset Management and the president of the Royal Bank of Canada, which is the nation’s largest financial institution. Morgan Stanley will be represented in Telfs by board member Klaus Kleinfeld, who also runs the world’s third largest aluminium producer, Alcoa.

From the worlds of industry and manufacturing are some eye-wateringly big names. The CEO of Michelin is invited, along with the head of Roche, the CEO of Royal Dutch Shell, the chairman of BP, the CEO of Siemens Austria and the heads of various industrial conglomerates such as Techint and Investor AB, companies so large they’re hard to classify. Although “gigantic” goes some way towards it.

It’s a heady step up into the big league for Michael O’Leary, the CEO of Ryanair. He’ll doubtless be hoping to thrash out a few last-minute deals over dinner with the head of Airbus, Thomas Enders.

Apart from making holiday jets, Airbus is also one of the world’s biggest arms manufacturers, and the 2015 conference agenda has a distinct whiff of war. Chemical weapons threats and Nato are both set to be discussed. Luckily the head of Nato is there to discuss it.

As ever, foreign policy formation is a big part of the conference. Terrorism and Iran both make the agenda this year, and participants can expect a high-level briefing from senior US State Department official John R Allen, the special presidential envoy for the Global Coalition to Counter Isil. And it’s likely that the subject of Russia will be of interest to the German defence minister and deputy defence minister, both of whom have found the time this week to be in Telfs. As has the head of the Danish intelligence service, who will likely have a part to play in the session of cybersecurity.

Finally, it’s worth noting the growing presence of Google at Bilderberg. The company’s executive chairman, Eric Schmidt, is on the group’s steering committee; he’ll be joined in Austria by his vice-president for engineering, advanced technology and projects, and the vice-president of engineering for the not-at-all terrifying sounding Google DeepMind. They, presumably, will be leading the session on artificial intelligence. This will be listened to with great interest by Peter Thiel, the founder of PayPal and director of Facebook, as he continues his quest to merge with computers. But that’s another story.

For now, the story is: Bilderberg 2015 has an extremely high-powered participant list, featuring a large number of senior politicians and public figures. With participants this powerful, and an agenda containing this many hot topics, the Telfs policy conference is sure to be covered in depth by the world’s press. And by “sure to be”, I mean probably won’t be. For reasons that, as ever, escape me.

Above article originally posted at the Guardian. Follow Charlie Skelton’s Bilderblog updates.

Here is the full list of attendees.

Telfs-Buchen, Austria 11 – 14 June 2015

Final list of Participants

Chairman

Castries, Henri de Chairman and CEO, AXA Group FRA
Achleitner, Paul M. Chairman of the Supervisory Board, Deutsche Bank AG DEU
Agius, Marcus Non-Executive Chairman, PA Consulting Group GBR
Ahrenkiel, Thomas Director, Danish Intelligence Service (DDIS) DNK
Allen, John R. Special Presidential Envoy for the Global Coalition to Counter ISIL, US Department of State USA
Altman, Roger C. Executive Chairman, Evercore USA
Applebaum, Anne Director of Transitions Forum, Legatum Institute POL
Apunen, Matti Director, Finnish Business and Policy Forum EVA FIN
Baird, Zoë CEO and President, Markle Foundation USA
Balls, Edward M. Former Shadow Chancellor of the Exchequer GBR
Balsemão, Francisco Pinto Chairman, Impresa SGPS PRT
Barroso, José M. Durão Former President of the European Commission PRT
Baverez, Nicolas Partner, Gibson, Dunn & Crutcher LLP FRA
Benko, René Founder, SIGNA Holding GmbH AUT
Bernabè, Franco Chairman, FB Group SRL ITA
Beurden, Ben van CEO, Royal Dutch Shell plc NLD
Bigorgne, Laurent Director, Institut Montaigne FRA
Boone, Laurence Special Adviser on Financial and Economic Affairs to the President FRA
Botín, Ana P. Chairman, Banco Santander ESP
Brandtzæg, Svein Richard President and CEO, Norsk Hydro ASA NOR
Bronner, Oscar Publisher, Standard Verlagsgesellschaft AUT
Burns, William President, Carnegie Endowment for International Peace USA
Calvar, Patrick Director General, DGSI FRA
Castries, Henri de Chairman, Bilderberg Meetings; Chairman and CEO, AXA Group FRA
Cebrián, Juan Luis Executive Chairman, Grupo PRISA ESP
Clark, W. Edmund Retired Executive, TD Bank Group CAN
Coeuré, Benoît Member of the Executive Board, European Central Bank INT
Coyne, Andrew Editor, Editorials and Comment, National Post CAN
Damberg, Mikael L. Minister for Enterprise and Innovation SWE
De Gucht, Karel Former EU Trade Commissioner, State Minister BEL
Dijsselbloem, Jeroen Minister of Finance NLD
Donilon, Thomas E. Former U.S. National Security Advisor; Partner and Vice Chair, O’Melveny & Myers LLP USA
Döpfner, Mathias CEO, Axel Springer SE DEU
Dowling, Ann President, Royal Academy of Engineering GBR
Dugan, Regina Vice President for Engineering, Advanced Technology and Projects, Google USA
Eilertsen, Trine Political Editor, Aftenposten NOR
Eldrup, Merete CEO, TV 2 Danmark A/S DNK
Elkann, John Chairman and CEO, EXOR; Chairman, Fiat Chrysler Automobiles ITA
Enders, Thomas CEO, Airbus Group DEU
Erdoes, Mary CEO, JP Morgan Asset Management USA
Fairhead, Rona Chairman, BBC Trust GBR
Federspiel, Ulrik Executive Vice President, Haldor Topsøe A/S DNK
Feldstein, Martin S. President Emeritus, NBER;  Professor of Economics, Harvard University USA
Ferguson, Niall Professor of History, Harvard University, Gunzberg Center for European Studies USA
Fischer, Heinz Federal President AUT
Flint, Douglas J. Group Chairman, HSBC Holdings plc GBR
Franz, Christoph Chairman of the Board, F. Hoffmann-La Roche Ltd CHE
Fresco, Louise O. President and Chairman Executive Board, Wageningen University and Research Centre NLD
Griffin, Kenneth Founder and CEO, Citadel Investment Group, LLC USA
Gruber, Lilli Executive Editor and Anchor “Otto e mezzo”, La7 TV ITA
Guriev, Sergei Professor of Economics, Sciences Po RUS
Gürkaynak, Gönenç Managing Partner, ELIG Law Firm TUR
Gusenbauer, Alfred Former Chancellor of the Republic of Austria AUT
Halberstadt, Victor Professor of Economics, Leiden University NLD
Hampel, Erich Chairman, UniCredit Bank Austria AG AUT
Hassabis, Demis Vice President of Engineering, Google DeepMind GBR
Hesoun, Wolfgang CEO, Siemens Austria AUT
Hildebrand, Philipp Vice Chairman, BlackRock Inc. CHE
Hoffman, Reid Co-Founder and Executive Chairman, LinkedIn USA
Ischinger, Wolfgang Chairman, Munich Security Conference INT
Jacobs, Kenneth M. Chairman and CEO, Lazard USA
Jäkel, Julia CEO, Gruner + Jahr DEU
Johnson, James A. Chairman, Johnson Capital Partners USA
Juppé, Alain Mayor of Bordeaux, Former Prime Minister FRA
Kaeser, Joe President and CEO, Siemens AG DEU
Karp, Alex CEO, Palantir Technologies USA
Kepel, Gilles University Professor, Sciences Po FRA
Kerr, John Deputy Chairman, Scottish Power GBR
Kesici, Ilhan MP, Turkish Parliament TUR
Kissinger, Henry A. Chairman, Kissinger Associates, Inc. USA
Kleinfeld, Klaus Chairman and CEO, Alcoa USA
Knot, Klaas H.W. President, De Nederlandsche Bank NLD
Koç, Mustafa V. Chairman, Koç Holding A.S. TUR
Kogler, Konrad Director General, Directorate General for Public Security AUT
Kravis, Henry R. Co-Chairman and Co-CEO, Kohlberg Kravis Roberts & Co. USA
Kravis, Marie-Josée Senior Fellow and Vice Chair, Hudson Institute USA
Kudelski, André Chairman and CEO, Kudelski Group CHE
Lauk, Kurt President, Globe Capital Partners DEU
Lemne, Carola CEO, The Confederation of Swedish Enterprise SWE
Levey, Stuart Chief Legal Officer, HSBC Holdings plc USA
Leyen, Ursula von der Minister of Defence DEU
Leysen, Thomas Chairman of the Board of Directors, KBC Group BEL
Maher, Shiraz Senior Research Fellow, ICSR, King’s College London GBR
Markus Lassen, Christina Head of Department, Ministry of Foreign Affairs, Security Policy and Stabilisation DNK
Mathews, Jessica T. Distinguished Fellow, Carnegie Endowment for International Peace USA
Mattis, James Distinguished Visiting Fellow, Hoover Institution, Stanford University USA
Maudet, Pierre Vice-President of the State Council, Department of Security, Police and the Economy of Geneva CHE
McKay, David I. President and CEO, Royal Bank of Canada CAN
Mert, Nuray Columnist, Professor of Political Science, Istanbul University TUR
Messina, Jim CEO, The Messina Group USA
Michel, Charles Prime Minister BEL
Micklethwait, John Editor-in-Chief, Bloomberg LP USA
Minton Beddoes, Zanny Editor-in-Chief, The Economist GBR
Monti, Mario Senator-for-life; President, Bocconi University ITA
Mörttinen, Leena Executive Director, The Finnish Family Firms Association FIN
Mundie, Craig J. Principal, Mundie & Associates USA
Munroe-Blum, Heather Chairperson, Canada Pension Plan Investment Board CAN
Netherlands, H.R.H. Princess Beatrix of the NLD
O’Leary, Michael CEO, Ryanair Plc IRL
Osborne, George First Secretary of State and Chancellor of the Exchequer GBR
Özel, Soli Columnist, Haberturk Newspaper; Senior Lecturer, Kadir Has University TUR
Papalexopoulos, Dimitri Group CEO, Titan Cement Co. GRC
Pégard, Catherine President, Public Establishment of the Palace, Museum and National Estate of Versailles FRA
Perle, Richard N. Resident Fellow, American Enterprise Institute USA
Petraeus, David H. Chairman, KKR Global Institute USA
Pikrammenos, Panagiotis Honorary President of The Hellenic Council of State GRC
Reisman, Heather M. Chair and CEO, Indigo Books & Music Inc. CAN
Rocca, Gianfelice Chairman, Techint Group ITA
Roiss, Gerhard CEO, OMV Austria AUT
Rubin, Robert E. Co Chair, Council on Foreign Relations; Former Secretary of the Treasury USA
Rutte, Mark Prime Minister NLD
Sadjadpour, Karim Senior Associate, Carnegie Endowment for International Peace USA
Sánchez Pérez-Castejón, Pedro Leader, Partido Socialista Obrero Español PSOE ESP
Sawers, John Chairman and Partner, Macro Advisory Partners GBR
Sayek Böke, Selin Vice President, Republican People’s Party TUR
Schmidt, Eric E. Executive Chairman, Google Inc. USA
Scholten, Rudolf CEO, Oesterreichische Kontrollbank AG AUT
Senard, Jean-Dominique CEO, Michelin Group FRA
Sevelda, Karl CEO, Raiffeisen Bank International AG AUT
Stoltenberg, Jens Secretary General, NATO INT
Stubb, Alexander Prime Minister FIN
Suder, Katrin Deputy Minister of Defense DEU
Sutherland, Peter D. UN Special Representative; Chairman, Goldman Sachs International IRL
Svanberg, Carl-Henric Chairman, BP plc; Chairman, AB Volvo SWE
Svarva, Olaug CEO, The Government Pension Fund Norway NOR
Thiel, Peter A. President, Thiel Capital USA
Tsoukalis, Loukas President, Hellenic Foundation for European and Foreign Policy GRC
Üzümcü, Ahmet Director-General, Organisation for the Prohibition of Chemical Weapons INT
Vitorino, António M. Partner, Cuetrecasas, Concalves Pereira, RL PRT
Wallenberg, Jacob Chairman, Investor AB SWE
Weber, Vin Partner, Mercury LLC USA
Wolf, Martin H. Chief Economics Commentator, The Financial Times GBR
Wolfensohn, James D. Chairman and CEO, Wolfensohn and Company USA
Zoellick, Robert B. Chairman, Board of International Advisors, The Goldman Sachs Group USA

Notably in attendance is Jim Messina, chief advisor to Hillary Clinton, who is presumably the favored candidate in the upcoming 2016 election.

Among Millionaire Voters, Hillary is the Favorite

Image by Getty

Hillary Clinton has never had a reputation for championing — at least in practice — your everyday American. After all, she fully supported the Wall Street bailout in the midst of the 2008 financial crisis, further cementing the financiers’ backing for her presidential run in 2016. She is cozy with Goldman Sachs’ Gary Gensler, and is reportedly preparing to choose him as the country’s next treasury secretary if she gets elected.

Now we have a report from CNBC on a survey showing that Mrs. Clinton is the favorite candidate among millionaire voters, surpassing even Jeb Bush for the top spot:

“The survey, which polls 750 Americans with a net worth of $1 million or more, found that 53 percent of millionaires would vote for the Democratic ex-Secretary of State, compared with 47 percent for the GOP presidential hopeful, in a hypothetical general-election match-up. Clinton had the support of 91 percent of Democratic millionaires, 13 percent of Republican millionaires and 57 percent of Independent millionaires.

“The CNBC Millionaire Survey skews more Republican than the broader voting population, which makes the support for Hillary even more notable. Of the millionaires polled, 34 percent were Independent, 31 percent were Republican and 34 percent were Democrats (a few didn’t give an affiliation).”

There’s nothing wrong with having millionaire support per se, but this is yet another indicator of Mrs. Clinton’s crony agenda to benefit the politically connected few. It also comes with the usual dose of irony, considering her campaign is framing her as an enemy of the 1% who is fighting hard for the middle class and the poor. Many Americans already know whose interests she really has in mind, but it’s time for her liberal supporters to dig a little deeper as to why the banks have been pouring cash into her campaign.