Purple People Vote

US News and World Report is reports in their article Why Democrats Will Target the Investor Class in 2009 that a Democrat run government will target a government take over of savings and investments for political expediency. It should be noted that the ‘investor class’ includes people who put thier savings in IRA’s and 401K’s. This isn’t the super wealthy, this is most often responsible middle class Americans that save for retirement and other needs. This not only threatens people’s savings it is more evidence that a government fully controlled by the Democrats will result in a dramatic lurch to the left as thes are plans for more big government control.

1) Hike Investment Taxes. Obama wants to raise capital gains taxes even though he has kinda, sorta admitted that it might be bad for the economy and might actually decrease tax revenue to the government. For now, he’s talking about raising the highest cap gains rate by one third to 20 percent, though earlier in the campaign, he floated pushing it as high as 28 percent, a near doubling. (Recall that Democratic presidential contender John Edwards wanted to raise it as high as 40 percent, a move that was applauded by liberals who want investment income to be taxed as onerously as labor income.) With the next administration facing a trillion dollar budget deficit—maybe more—there will certainly be pressure to raise taxes to higher levels than now being suggested.

2) Eliminate 401(k)’s, IRAs, and other retirement plans. Democrats in the House are now talking openly about the longtime liberal dream of repealing the tax advantages of putting money into a 401(k) plan or other tax-advantaged retirement account. “The savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should,” said Rep. Jim McDermott, a Democrat from Washington at a recent hearing, according to an industry trade paper.

Indeed, House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” with a 3 percent real return.

Not only would removing the preferential tax treatment of these vehicles raise investment taxes by $100 billion a year and affect Americans making less than $100,000, it would surely prompt many Americans, already shell-shocked by the market’s recent losses, to flee stocks. All this ignores the fact that there are trillions of dollars in American retirement accounts, and abandoning the higher-returning stock market at a probable bottom is classic financial foolishness. If you believe long term in the American economy, then you have to believe in the stock market. If you don’t, then you have to admit the government won’t be able to afford its promises anyway.

3) Replace private capital with public capital. But wouldn’t a weak stock market hurt the economy by making it tougher to raise investment capital and lessen the return on risk? Surely, it would. But Obama is planning hundreds of billions of dollars of government “investment” in cutting-edge technology, particularly in the energy and healthcare sectors. One specific example: Obama wants to create something called a “Clean Technologies Venture Capital Fund” and invest $10 billion a year in emerging energy technologies. Now, the private VC industry is already pouring billions into alternative energy, but Obama thinks that’s not enough and wants Uncle Sam to get in on the action at taxpayer expense. Interestingly, a new study by the University of British Columbia looked at the performance of the Canadian government’s venture capital efforts. It found that government venture capital isn’t nearly as successful as private venture capital.