Austan Goolsbee, formerly on the President's Council of Economic Advisors, appeared on Your World yesterday to discuss Warren Buffet's secretary sitting with the First Lady at the State of the Union address.
Goolsbee said, "It doesn't make a lot sense that his secretary would be paying a higher rate than him, and what people are forgetting in this discussion is, everybody working on your first $105,000 or something of your income, you’re also paying seven-plus percent of Social Security and Medicare payroll taxes."
Cavuto suggested the answer was more tax cuts. He said, "Here's what we have to do. You can bring her tax rate down or you can raise Warren Buffet's capital gains rate up… Mitt Romney, he’s paying about 15%. Now let's say she's paying 28%, I don't know for sure… Should you raise… the capital gains rate to 28%?"
"You could try to equalize those rates in multiple ways," Gooslbee said. "…Over the last 10-12 years, we’ve cut the highest capital gains tax rate basically in half, and the overall taxes paid by the 400 richest people in the country have been cut in half."
Cavuto argued,l "Leaving aside the fact that you're already paying taxes on the income that you're paying taxes on again."
"Well, Goolsbee began."
"You are," Cavuto insisted.
"Hold on a second," Goolsbee said.
Cavuto continued, "What would induce you to invest in a corporation… when you know the cost could effectively double? You're thinking, 'If I'm taxed at 15% on that, I might go in…' If I know that the tax is going to be closer to 30%, I might not take the risk right?" How would Cavuto know that? He didn't explain.
But Goolsbee questioned it. "Maybe," he said. "...The President enacting setting the capital gains rate to zero if you're investing in or starting your own small business… George Bush cut the top capital gains tax rate to about the lowest its ever been, and it didn't unleash massive growth in the country."
Cavuto predictably defended Bush. "He had lowered income rates… The President wants to raise the top income rate, that’s fine, but he also then wants to raise the cap gains rate, something’s got to give, right?" Comment: Is that a question Neil?
Goolsbe said that in the 1990's,"rates were modestly higher at the top… we saw a great flowering of entrepreneurship in the country."
Goolsbe did a fine job rebutting Cavuto, who stood up for the rich once again.