Democratic presidential candidate John Edwards--once again seeking to drive the 2008 campaign debate within his party--will today propose raising the capital gains tax rate to 28% from 15%, and use the money to finance tax cuts for middle and lower income families. While raising the capital gains levy to that level, which Edwards points out was a rate once signed into law by President Ronald Reagan, Edwards proposes a series of breaks for those not currently thriving in the U.S. economy:
*an exemption for each family's first $250 in interest, capital gains and dividend income, to help low-income families accumulate wealth.
*a "Get Ahead" credit providing a dollar for dollar government match of up to $500 in savings for low-income workers
*"work bonds" for low income families to match savings of the lowest-income families of up to $500 a year, letting those families receive $1,000 in savings assistance from the government.
*allowing families to deposit all or part of their federal child care tax credit into a tax-free savings account that could be withdrawn for any use when the child turns 18.
*expand the federal child care credit to pay up to 50% of child-care up to $5,000.
*tripling the Earned Income Tax credit for 4 million adults without children.
To help finance these breaks, Edwards would take additional steps beyond raising the capital gains rate. He'd raise taxes on private equity and hedge fund executives by taxing so-called "carried interest" as ordinary income rather than at the current 15% capital gains rate. He'd curb executive pensions by capping at $1-million the amount of compensation executives can defer. He'd roll back the Bush tax cuts for families earning more than $200,000 a year. And he'd "declare war on tax havens" by empowering the IRS to investigation abuse of offshore tax breaks.
"It's time for us to put our economy back in line with our values," Edwards says in remarks prepared for delivery in Des Moines Iowa today. "It's time for us to fight back for the American dream that says we have opportunity for all and special privileges for none."
Neither Hillary Clintonnor Barack Obamahas outlined a detail tax plan so far, though both have expressed support for rolling back some Bush tax cuts and the same step on carried interest that Edwards is advocating. Obama's campaign has indicated he favors raising the capital gains rate to 20% from 15%.