Taxing Obsession

Garry Wills

September 14, 1990|By Garry Wills

WASHINGTON — Washington. THE PRESIDENT went on television to explain the American stand in the Middle East -- and to ask, once again, for a cut in the capital-gains tax. The last is a kind of obsession with Mr. Bush, and it tells us that he has not learned the lesson of the 1980s. That period of giving breaks to the rich led to the atmosphere of greed and speculation that produced scandals at the S&Ls, at HUD, at the Department of Defense.

The best advice on this matter comes from a Japanese critic of American business practices, Shintaro Ishihara. In a provocative and very bright Playboy interview, Mr. Ishihara points out: ''In Japan, in order to suppress excesses in money games -- paper shuffling to create profits based on nothing -- we made it law to impose a high tax on capital gains.'' The example of Japan should lead us to raise, not lower, the tax on capital gains.

Mr. Ishihara is not an American-basher, though his part in the book called ''A Japan That Can Say No'' gave that impression. admits that America leads in basic research and broad productivity. He does not expect Japan to overtake America in those areas, but to serve as a useful stimulant, a strong second in the world's economy. That will be a healthy thing, he argues, for both America and Japan.

But to stabilize this situation, each country must make important changes. Mr. Ishihara calls for reform of the Japanese education system, which inhibits creativity. He also calls for discipline among American businessmen, of which the capital-gains tax is an important basis and symbol. Here is what he has to say on the capital-gains tax:

''Why is there nothing like that in America to discourage companies' being bought and sold and destroyed with no attention to whether or not they make a good product? How come the United States does not introduce a similar system in order to stop all these excessive mergers and acquisitions, conducted on a tactical level by corporations, that have nothing to do with making the corporation stronger over the long term for the employees and for the economy as a whole?

''I think if you introduced that (high capital-gains tax), American management would conduct its business with a foothold on the ground. Maybe then Rockefeller Center would not have to be sold. Companies' executives, instead of making mergers and acquisitions, must make their companies thrive. Management must be revived if the dynamism of American industry is to be revived. It means changing their philosophy of how to manage.''

The idea that tax breaks for the wealthy would lead to prosperity for all turned out to be Ronald Reagan's grisly joke on America. Kevin Phillips has toted up the cost to the poor in his book, ''The Politics of Rich and Poor.'' President Bush, who is at least innovative in his foreign policy, has shown no independence from the Reagan regime in dealing with domestic crises, especially the economic danger now impending. His continued support for the capital-gains tax is a confession of intellectual bankruptcy to match our financial depletion.

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