Last week, Republican presidential candidate and former Utah Gov. Jon Huntsman (R) signaled in an interview with PBS NewsHour that as president, he would ask the wealthiest Americans to share in the sacrifice needed to reduce the nation’s debt and deficits. The next day, in an interview with Bloomberg’s editorial board, Huntsman hinted that he would consider treating taxes on capital gains and carried interest as regular income, two de facto tax increases that would primarily affect Wall Street investors, hedge fund managers, and those in the private equity industry. Sixty-eight percent of capital gains taxes are paid by the top 1 percent of American earners.
Just hours later, Huntsman campaign spokesman Tim Miller walked back those comments, saying Huntsman “does not support any policy that would increase the capital gains or carried interest rates.” Now, less than a week after the original comments, Huntsman has proposed a tax plan that would eliminate the capital gains tax altogether, Reuters columnist James Pethokoukis reports:
Huntsman says he would do the following:
1) Eliminate all deductions and credits in favor of three drastically lower rates of 8%, 14% and 23%.
2) Eliminate the Alternative Minimum Tax.
3) Eliminate taxes on capital gains and dividends in order to eliminate the double taxation on investment.
4) Reduce the corporate rate from 35% To 25%. Huntsman would also shift to a territorial tax system and implement a tax holiday for the repatriation of foreign earnings.
The conservative argument against treating the capital gains tax as income is that it would discourage investment and slow economic growth, though as former White House economic adviser Jared Bernstein and the Center on Budget and Policy Priorities have noted, there is little evidence to back up those claims. Warren Buffett discredits the argument totally, saying he has “yet to see anyone…shy away from a sensible investment because of the tax rate on the potential gain,” even when capital gains tax rates were nearly 40 percent in the 1970s.
Taxing capital gains as normal income, as Huntsman seemed to support Friday, could bring in $38 billion in additional government revenue. By gutting the capital gains tax the way he has now proposed to do, Huntsman has effectively moved from asking the rich to share in the sacrifice to providing Wall Street bankers and corporations with humongous tax handouts, ensuring that once again, the only Americans Republicans are asking to sacrifice are those who can afford it least.