Larry Kudlow: Biden climate change, tax plans mean less investment, productivity, family income, and growth
If you tax something more, you'll get a lot less of it
‘Kudlow’ host Larry Kudlow slammed Biden's climate change and tax policies Thursday, saying if the administration raises the capital gains tax, there will be less investment, productivity, wages, family income, and growth.
LARRY KUDLOW: I’m all for the earth, but I am not for these climate change policies that are coming out. I am not a climate denier. I know there’s a human element to the carbon emissions story. I also know there are natural elements to the carbon story. What we learned today is that President Biden wants to slash the level of carbon emissions to be 50% lower in 2030 than the level of 2005. Presently, we are 12% lower. We also learned that President Biden intends to double the capital gains tax, essentially taking it up from 20% to 40%. The 3.5% Obamacare surtax on investment remains the same.
And, the Senate GOP unveiled its own infrastructure plan, with about $650 billion price tag, and no tax increases on businesses or investments. They are properly substituting user fees, P3 – public-private partnerships, local bonding, all of which can finance traditional infrastructure without big tax hikes.
Now, let’s talk about this capital gains tax hike. First, since it seemed to rock the stock market, as advertised before, team Biden wants to move the base rate from 20 to 39.6%. So, that taxes investment income as ordinary income. The 3.8% surtax won’t change. So, it’s a doubling of the cap gains tax. Now, you have to explain to me how a doubling of the primary tax on investment risk is going to yield more investment. You have to explain that to me….you’re never going to convince me of this. And I go back to my mentor, Art Laffer, who taught us all if you tax something more, you’re going to get less of it. And if you tax something less, you’ll get more of it. So here, we are taxing investment and risk taking a whole lot more, and that seems to suggest it will yield a whole lot less investment and growth. It means lower productivity, lower real wages, lower family income, lower GDP.