July 21, 2015
By Scott Hodge
Tax policy is thought by many in Washington to be one of the more effective tools in the battle against inequality. Indeed, presidential candidates like Bernie Sanders have implied they would raise taxes on the rich to correct for rising inequality, and according to the Wall Street Journal, Hillary Clinton is set to announce her plans to increase taxes on capital gains this week.
Populist calls for higher taxes on the rich play very well on the stump, but the resulting policies always seem to produce unintended consequences. Two provisions of Bill Clinton's 1993 tax increase are good examples: The luxury tax on yachts nearly killed the domestic boat-building industry; and, the $1 million limitation on the deductibility of executive salaries encouraged companies to compensate CEOs with stock options rather than wages, which has likely made executives more focused on short-term share prices and less on long-term profitability.
The latest example of progressive tax policy gone wrong is the so-called Fiscal Cliff deal President Obama struck with House Speaker John Boehner at the end of 2012, which raised taxes on the rich through higher tax rates on wages, capital gains, and dividend income.
Read the full article at RealClearMarkets.com: The Unintended Consequences of Hillary's Soak-the-Rich Tax Policies