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President expected to call for tax hikes on the wealthy

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    Former White House economic adviser Austan Goolsbee weighs in

  • Duration 5:02
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Tonight Austin -- me is former top economic advisor joining me right now Austin I guess the president's -- will be.

She pays a lower rate than her boss Warren Buffett.

By the way if I'm Warren Buffett I'm gonna start giving this lady a lot more money because she's become a poster child she deserves a -- leaving that aside.

What what do you think the effect will be.

The effect of that as a policy or the effect of that it the in the speech.

Both.

Well I happen agree with it with the Warren -- insight did.

The first just on income tax rates.

It doesn't make a lot of 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 105000.

Or something of your income you're also paying seven plus percent.

Of social security and Medicare payroll taxes so it if you start looking and compare.

The guy that makes up.

500 million dollars a year to seven and makes 50000 dollars a year and -- don't think that that makes sense now I don't Lawrence's.

He has always had to do than what I thought -- here's a we have to do than let's say the view except that when -- you.

And that that that's not right then you could bring her income tax rate down or you couldn't raise Warren Buffett's capital gains rate up.

Right now is a long term investor like Mitt Romney is paying about 50%.

Now let's say -- -- 28% I don't know for sure but I think it's about that so -- you raise that rate the capital gains rate.

228%.

To do effectively -- it to make it -- -- Comparable.

You could do it you could try to equalize those rates in multiple ways as you say over the last ten to twelve years.

We've cut the highest capital gains tax rate.

-- basically in half and they overall taxes paid by them -- -- richest people in the country have been cut in half.

So of those same people saying that it would be crazy for that number to go back up.

What were they saying when it was cut in half this is about the lowest rate that it has ever be in in US history since.

We will ask it is supposed to go up it is supposed to go up to 20% next year.

And then it's going to be just index whatever the income rate is so there's an argument be made.

Whatever income rate your you just -- that on on your gains and investments are leaving aside all Ronald Reagan did.

But leaving aside the fact -- are already paying.

Taxes on the income that you're paying taxes on again.

I guess I'm asking you well you are but I want -- regrets this honest like wow let me -- what would you do see you.

To invest in a corporation Ornette apprised.

When the cost of getting in when you know the cost of getting in.

Could effectively double.

You're thinking if I'm an attack taxed -- 50% on that I might go -- take a risk if I know that the tax is going to be closer to 30%.

I might not take the -- It's right what may it may be I would say three things I think number one there is an issue there that's why build that know no one is talking about -- The president enacted setting the capital gains rate to zero.

If you are investing in or starting your own small business so.

I think there is to be fair an argument to be made about that.

Now I think when we did -- the reverse.

If that was a magic elixir.

Then how do you explain what happened George Bush cut the top capital gains tax rate to about the lowest it's ever been.

And it didn't unleash massive growth in the country so I think the argument.

What you love when an idea already -- he had lowered the income brackets yet loading -- races so I mean at least he was doing that.

But you're saying that in the face would be in front racism Zelaya Horizon Lines -- and illicit -- -- -- the president wants her crazy that topic gummery.

That's -- but he also then wants to raise the cap gains or something's gotta give here right.

Well all I'm saying is it if we look at periods in the US history like.

Through the ninety's where the rates were modestly higher at the top the capital gains rates were modestly higher at the top.

And we didn't see a catastrophe.

In fact we saw great flowering of entrepreneurship in the country.

We looked at the two thousands where they cut that high income rates by trillions.

And we didn't see a massive explosion of entrepreneur where she.

Don't know your I don't get back you know and you're going to have to let it build an unused where everybody -- -- -- -- -- Bill Clinton got those if that's right he did -- -- operates.

But I love really has our neighbors.

My point is that in nineteen do both you you -- do a lot of hearts we can argue this but Austin I do wanna get you back it's always good having you on because.

At least -- reasonable.

-- -- -- -- -- Part of what we conduct a good disease there are gonna -- we come.

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