Obama's original promise to cancel the capital gains tax for small enterprises was highlighted on his campaign Web site under "Small Business Emergency Rescue Plan." A few weeks before the election, advisers Austan Goolsbee and Jason Furman touted their boss's pro-growth credentials by noting in this newspaper that "he is proposing additional tax cuts" that included"the elimination of capital gains taxes for small businesses and start-ups."
The revenue loss would be minimal, especially as compared to the rest of the $800 billion spend-a-thon, because any untaxed gains would only be realized well into the future.
But the proposal would at least signal some Democratic interest in encouraging businesses to take risks again -- the only way the economy is going to recover.
So what happened?
• According to the Journal, the obstacle is House Democrats, who oppose any cut in capital gains tax rates.
• The objection seems to be wholly ideological, a concern that such a cut -- even for start-ups, rather than for current capital holdings -- would validate Republican tax-cutters.
• The White House decided not to fight Democrats to add the President's own pro-growth idea to a bill whose supposed purpose is to promote growth.
This looks like an early example of Obama repeating a mistake that President Bush made too often -- refusing to challenge a Congress run by his own party.
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