Washington’s Tax War on Prosperity

Today’s precipitous stock market plunge—presently down over 150 on the Dow—is all about Washington’s war on prosperity.

Make no mistake here: if the Democrats in Congress get their way, their punitive, soak-the-rich, tax hiking program would constitute the biggest attack on capital since the 1930s.

Two key, front-page, news stories (yesterday’s New York Times by Aaron Ross Sorkin, and this morning’s Wall Street Journal by Sarah Lueck et al) lay out the Democrats’ reckless strategy to essentially abolish the 15 percent capital gains tax preference for risk investing, and raise it by 20 percentage points to the already too high 35 percent corporate rate.

And, that’s not all.

The left wing’s broad based assault on wealth, investment, and savings would extend far beyond Blackstone’s successful Wall Street IPO today. The Democratic strategy would affect all private partnerships engaged in investment risk—this includes buyout funds, hedge funds, venture capital firms, real estate partnerships and oil & gas deals that qualify for the 90 percent passive income tax preference.

Their ill-advised strategy would strike a dagger into the heart of U.S. capital formation.

Nobody knows for sure whether Congress will green light these anti-growth ideas. The great presumption (and hope) is that President Bush would veto them if they did.

But right now, these newspaper reports are giving the stock market serious heartburn. The mere threat that Congress would embark on such a program of wealth destruction and economic impoverishment—all in the name of taxing rich people with the usual inside-the-beltway mantra of “tax fairness”—has investors reeling.