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That the Biden administration has enormous confidence in the government’s ability to invest wisely is no secret, however ill-founded that confidence may turn out to be. So there is a certain perverse logic to its proposal to fund, at least in part, the newest proposed spending spree with a dramatic increase in the capital-gains tax rates paid by — a bit of class warfare always helps — “the rich.” To believe that this will not discourage investment is to believe that those investors who are subject to the tax disregard post-tax returns. That’s not likely. They will either demand a higher price for their capital, or put an increased premium on safety, or search for investments that offer less in the way of growth, but more in the way of tax shelter. Others may choose to consume more and invest less. Some would-be entrepreneurs, meanwhile, will decide not to give up their day jobs. None of these developments would be good for the economy and those who would benefit from its flourishing.

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