Back in September of 2008 in the heat of the political campaign for president, Barrack Obama changed his stance on capital gains taxes (Here is a captial gains primer.)  In Barrack Obama’s Comprehensive Tax Plan it stated he would:

Eliminate capital gains taxes for small businesses, cut corporate taxes
for firms that invest and create jobs in the United States, and provide
tax credits to reduce the cost of healthcare and to reward investments
in innovation. (Factsheet_Tax_Plan_FINAL pdf)

The eliminate capital gains for small businesses was very interesting to me.  I declared such a policy was “something I could live with.”

But alas, that was then. This is now. Erik Peterson pointed me to this article by PolitFact.  Deep within the 285 page Joint Explanatory Statement: Section B on pages 60 and 61 new capital gain tax treatments for small businesses are outlined.  This is in part what it says.

Under present law, individuals may exclude 50 percent (60 percent for certain
empowerment zone businesses) of the gain from the sale of certain small business stock acquired at original issue and held for at least five years. The portion of the gain includible in taxable income is taxed at a maximum rate of 28 percent under the regular tax. A percentage of the excluded gain is an alternative minimum tax preference; the portion of the gain includible in alternative minimum taxable income is taxed at a maximum rate of 28 percent under the alternative minimum tax.

Thus, under present law, gain from the sale of qualified small business stock is taxed at effective rates of 14 percent under the regular tax.

The amount of gain eligible for the exclusion by an individual with respect to any corporation is the greater of (1) ten times the taxpayer’s basis in the stock or (2) $10 million. In order to qualify as a small business, when the stock is issued, the gross assets of the corporation may not exceed $50 million.

And.

Under the Senate amendment, the percentage exclusion for qualified small business stock sold by an individual is increased from 50 percent (60 percent for certain empowerment zone businesses) to 75 percent.

To generalize what the above lays out, the effective capital gains tax rate for investments in small businesses is going from 14% to 7%.  Seven percent is not eliminate.  I am disappointed.

President Obama inspired hope by making the big promise of change.  Like all good leaders, President Obama must remain true to his words. While the above is just a single example, if breaking smaller promises becomes a habit for this administration, the people are going to stop believing.  And that would be a sad day for America.