It's too easy to label President Obama's State of the Union as more "tax-the-rich" and redistribution. We already know that. Rather than name-calling, Republicans must draw a clear line in the sand between their worldview and Obama's.
I'd call that line common sense economics.
There are a few rules of thumb to keep in mind. First, you can't create a new business, or sustain an existing one, without the seed corn and nourishment of capital investment. Secondly, only businesses create jobs. You can't have a job without a business.
Third, jobs create all incomes, including middle-class incomes. Lastly, incomes create family and consumer spending. Got all that?
This is not complicated. It's common economic sense, but University of Chicago economist Casey Mulligan states this in a simpler way: Growth starts with investment and ends with consumer spending.
Regrettably, Obama doesn't get this. That's why he's proposing the third capital-gains tax hike of his tenure. He started at 15 percent, went to 20 percent, with Obamacare took it to 23.8 percent—and now wants 28 percent. This damages business, jobs, and middle-class incomes.
Ironically, history shows that lower capital-gains tax rates produce higher revenue. Think Bill Clinton and George W. Bush. But a higher capital-gains tax produces lower revenue. Think late-Reagan, Bush Sr., and now Obama.
Obama also proposes to raise the tax burden on capital by increasing inheritance and estate taxes. And he's making another attempt to tax banks—only this time he is adding in asset managers and insurance companies. Ironically, a huge part of Obama's base—police officers, firefighters, teachers—might suffer a serious depreciation of pension-fund stockholdings.
So, taxing capital will hurt the very middle-class workers and incomes Obama claims he wants to help. His so-called middle-class economics doesn't work.