From Clinton’s Mouth To Rove’s Ad

by Alec MacGillis | October 4, 2011

When Barack Obama arrives in St. Louis tonight for a couple of fundraisers, he will be greeted by a targeted media hit from American Crossroads, the outside group led by Karl Rove that had such an impact in the 2010 midterms and is gearing up for the same next year. The group's new ad, a $50,000 buy in Missouri, will attack Obama's jobs plan by invoking the recent words of the president's ever-helpful fellow Democrat: Bill Clinton. In an interview two weeks ago, Clinton was waxing in his wistful, too-bad-the-world's-gone-to-hell-without-me mode when he offered up this nugget of criticism of Obama's "Buffett Rule" to raise taxes on millionaires who now pay remarkably low rates:

"We don't have a lot of resentment against people who are successful. We kind of like it, Americans. It's one of our best characteristics that, if we think someone earned their money fairly, we do not resent their success. Americans lost the fact that, whatever you think about this millionaire surcharge -- I don't really care because I would pay it but it won't affect me because I already paid income because I live in New York. I will pay more, but it won't solve the problem."

Bingo: "It won't solve the problem." No, it won't, partly because it's not easy to come up with a new surcharge that will hit only incomes over a certain threshold that are now being taxed at a unusually low rate -- effectively, it would mean coming up with a new Alternative Minimum Tax, and we know how well that worked out. No, the easier way to deal with the low tax rates paid by many of the very wealthy would be to equalize the tax treatment of ordinary income and capital gains, which are taxed at only 15 percent. Half of all capital gains in the country are claimed by the top one tenth of one percent of the population -- no, that's not a typo -- and those gains are being taxed at a lower rate than most Americans pay on their regular income, which goes a long way to explaining why Warren Buffett and his ilk pay such astonishingly low rates.

And here's the funny thing: taxes on capital gains and ordinary income were indeed equalized in the 1986 tax overhaul signed by Ronald Reagan. But the capital gains rate was cut back to its own lower rate in 1997 -- under the presidency of the new Crossroads star, Bill Clinton.

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