WSJ's Drucker fails to note Obama would only increase capital gains taxes on individuals making more than $250,000

››› ››› MEREDITH ADAMS

The Wall Street Journal's Jesse Drucker wrote that Sen. Barack Obama has said he will "seek to raise" the capital gains tax to "at least 20%, the rate before the 2003 cut, and possibly higher." In fact, Obama has said he would not raise the capital gains tax on individuals with income of less than $250,000 -- a fact noted by WSJ reporter Tom Herman in an "Ask Dow Jones" Q-and-A.

In a July 23 Wall Street Journal article, reporter Jesse Drucker wrote that Sen. Barack Obama has said he will "seek to raise" the capital gains tax to "at least 20%, the rate before the 2003 cut, and possibly higher." In fact, Obama has said he would not raise the capital gains tax on individuals with income of less than $250,000 -- a fact noted by WSJ reporter Tom Herman in a July 20 "Ask Dow Jones" Q-and-A; Herman wrote, "Sen. Obama also proposes increasing taxes on long-term capital gains and dividends, but only for those people making more than $250,000."

In a videotaped interview with CNBC's John Harwood that aired on June 10, Obama said, "[K]eep in mind on all of these proposals, what I have said is, let's make sure that we define the well-off so that we're not hitting the middle class. I generally define well-off as people who are making $250,000 a year or more, and that means, for example, if we raise the capital gains tax, I would exempt people who are essentially small investors, and really capture the -- those who have done very, very well over the last two decades."

Indeed, Obama's published tax proposal expressly states: "Barack Obama Will Only Raise Taxes for Those Earning Over $250,000 Per Year."

From Drucker's July 23 Wall Street Journal article:

The figures about the relative income and tax rates of the wealthiest Americans come as the presumptive presidential candidates are in a debate about taxes. Congress and the next president will have to decide whether to extend several Bush-era tax cuts, including the 2003 reduction in tax rates on capital gains and dividends. Experts said those tax cuts in particular are playing a major role in falling tax rates for the very wealthy.

Sen. John McCain has proposed extending the lower tax rates of 15% on long-term capital gains and dividends that apply to most taxpayers, while Sen. Barack Obama has said he will seek to raise them to at least 20%, the rate before the 2003 cut, and possibly higher.

From Herman's July 20 Wall Street Journal "Ask Dow Jones" column:

Q: What are the federal income tax brackets and rates likely to be for tax year 2009? If it's too soon to have even somewhat reliable information, when might it be possible to make a prediction?

A.K., Rancho Murieta, Calif.

A: The Internal Revenue Service won't announce official income thresholds and other inflation-adjusted tax numbers, such as the standard deduction and personal exemption amounts, for tax year 2009 until late this year. However, I usually get reliable estimates, calculated by three respected private-sector tax experts, well before the IRS numbers are issued.

Last year, we published an early peek at the numbers for 2008 in late September.

The numbers came from three sources: the Tax & Accounting business of Thomson Reuters; CCH, a Wolters Kluwer business; and Northern Illinois University accountancy professor James Young.

As for tax rates: Under current law, federal income tax rates range from 10% to as high as 35%.

But nobody knows what will happen next year. Sen. John McCain wants to retain these rates. Sen. Barack Obama wants to raise taxes on people making over $250,000 a year.

For example, Sen. Obama proposes raising the top ordinary income-tax rate of 35% to 39.6%. He also proposes raising Social Security taxes on those making more than $250,000 a year but hasn't given details, such as how much more those people would be required to pay.

Sen. Obama also proposes increasing taxes on long-term capital gains and dividends, but only for those people making more than $250,000.

Under current law, the top rate on stocks, mutual-fund shares and other securities typically is 15%.

How much higher does Sen. Obama want to make it? An adviser says the rate would be lower than the 28% rate that prevailed during the Reagan presidency and "perhaps as low as 20%."

But for people making less than $250,000, "dividends or capital-gains rates would remain where they are."

All the uncertainty makes tax planning unusually difficult this year.

From the June 10 broadcast of CNBC's Your Money, Your Vote:

OBAMA: I think that we've had an economy that's been out of balance for too long. So the general principle of raising taxes on higher-income Americans like myself, and providing relief to those who haven't benefited as much from this new global economy, I think, is a sound one. And keep in mind on all of these proposals, what I have said is, let's make sure that we define the well-off so that we're not hitting the middle class. I generally define well-off as people who are making $250,000 a year or more, and that means, for example, if we raise the capital gains tax, I would exempt people who are essentially small investors, and really capture the -- those who have done very, very well over the last two decades.

Posted In
Economy, Taxes
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