John Steele Gordon

Before the Industrial Revolution, all manufacturing was local as transportation costs were prohibitively high, unless the goods could be shipped by water. Every town had its own cobbler to make shoes, for instance. With the coming of the railroads in the mid-19th century, national markets could develop. A shoe factory in Worcester, Massachusetts, could now be competitive everywhere. This led to vast economies of scale, bringing down the price of goods and thus increasing the demand for them. After World War Two, global trade increased by orders of magnitude, thanks to both the great lowering of tariffs and other trade restrictions and to the invention of the shipping container.

President Biden wants to nearly double the tax on income from capital gains, currently at 20 percent, to 39.6 percent. Add to that the 3.8 percent Obamacare surcharge and you’re up to 43.4 percent. Many states tax capital gains as well and in 13 of them (plus the District of Columbia) the total tax on capital gains would be over 50 percent with the proposed new federal rate. In California it would be a staggering 56.7 percent. But it gets worse. Unlike the tax on regular income, the capital gains tax is not indexed for inflation. So with long-held assets, much of the gain is illusory. For instance, if you bought an asset in 1971 for $50,000 and sold it this year for $1,000,000, you would owe taxes on a nominal capital gain of $950,000. At 56.