The Democrats' hatred of success

Larry Kudlow:

Last Friday's precipitous stock market plunge, with the Dow Jones dropping 185 points, is all about Washington's continued war on prosperity.

The latest assault comes courtesy of House Democrat Sander Levin. Late last week, he introduced a bill that essentially would abolish the 15 percent capital-gains tax preference for risk investing, and raise it by 20 percentage points to the 35 percent corporate and personal rate. This goes beyond an earlier tax attack on a public offering by the Blackstone Group, and would slam into all private partnerships, including buyout funds, hedge funds, venture-capital firms, real estate partnerships, and oil-and-gas deals.

Incidentally, while attacking capital gains, the congressional Democrats are killing initiatives for across-the-board cuts on wasteful appropriation bills. According to the Club for Growth, House Democrats defeated separate measures that would cut spending by 4 percent, 1 percent, and 0.5 percent.

Does this mean the Democrats favor tax hikes over real spending control? It appears so.

Washington economist Kevin Hassett says this is part of the Democrats' "war against winners," and he's right on the money. In particular, these willy-nilly changes of the tax rules would have a chilling effect on capital formation, and could constitute the biggest attack on capital since the 1930s.

As mentioned, the lightning rod in this tax-hike endeavor was the Blackstone Group, the private-equity giant that went public last week. Blackstone's investment-fund profits are taxed at the 15 percent cap-gains rate, and since these profits come from high-risk investments, that's how it should be. But Democrats in Congress view these profits as plain income, and greedily want a higher take.

But plain ol' income this is not. The recent crack up of two Bear Stearns sub-prime-mortgage hedge funds shows just how risky these ventures can be.

Yes, there's big money to be made when these private partnerships click. But the economy at large also is a beneficiary. Private buyout funds often save highly troubled companies from bankruptcy. They insert skilled managers who streamline operations and make businesses more efficient, a process that can ultimately lead to greater profits and business expansion. You know a lot of these companies: Chrysler, Staples, Sears, Domino's, Dunkin' Donuts, Toys"R"Us, Clear Channel Communications, Hospital Corporation of America. All of these firms were brought back from the dead thanks to private partnerships.

Nobody knows for sure whether Congress will green-light the Democrats' anti-growth agenda. The hope is that President Bush will veto any tax hike that lands on his desk. But the mere threat that Congress would embark on such a program of wealth destruction and economic impoverishment -- all in the name of taxing "rich people" -- has investors reeling.

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Greedy Democrats are always eager to get their hands on other peoples money through higher taxes. It is another reason no one should ever vote for Democrats. Their Robin Hood complex robs more than the rich, because it steals opportunity from all.