A capital gains tax reduces potential rewards of investment, I gather from p. 217 of Jude Wanniski’s 1978 book The Way the World Works.  Why wouldn’t it?  If it reduces rewards enough, the investment is not made.  New business is not started.  Jobs are not created.

Obama doesn’t see it that way.  Hearing the news that tax revenue increased during a certain time of reduced taxation, he was surprised but held his ground, opposing reduction for the sake of “fairness.”  He would rather all made less, for the sake of fewer earning more.

“[T]he idea of fairness is at the heart of his whole economic argument. And he goes back to it in almost every public appearance,” says William McGurn.

He talks about it as a general theme: “It is time for folks like me who make more than $250,000 to pay our fair share.”

He invokes it as a solution for Social Security: “[W]e will save Social Security for future generations by asking the wealthiest Americans to pay their fair share.”

He points to how it guides his energy policy: “The first part of my plan is to tax the windfall profits of oil companies and use some of that money to help you pay the rising price of gas.”

And he stuck to it on capital gains, even after ABC’s Charlie Gibson noted that the record shows increased taxes on capital gains — which would affect 100 million Americans — would likely lead to a decrease in government revenues: “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.”

In 1969, to continue with Wanniski, in Nixon’s first year, revenues were expected to rise $1.1 billion in 1970.  Instead, Nixon reneged on a tax cut, removed an investment tax credit, and spent on job training — and 1969’s $7.1 billion revenues dropped to an average of $4 billion in the following four years.

Also, hundreds of billions were lost in reduced output — and thus in jobs and overall prosperity.  This was “tax reform” in 1969.

In 1971, Nixon jettisoned his other promise, to balance the budget, and instead purposely unbalanced it for the sake of full employment in 1972 — which didn’t happen.  This gave him (us) a planned deficit to match 1970’s unplanned one. (218)