Dec 23, 2009 – The first presentation of Obama’s new “job stimulus” that first came out a couple of weeks ago contained one item that actually made a lot of sense: capital gains relief for investing in small businesses. Sadly, the words withered almost as soon as he spoke them and before long the focus was away from the important capital gains issue and on more “infrastructure spending” and more money for state and local governments.

Anyone who invests in small businesses will tell you that a reduced capital gains rate really does get the attention of angel investors and those who allocate capital. In general, there is a widespread feeling that higher taxes are coming like a freight train, so when we hear that we can invest and get better treatment on the capital gains (IF the investment actually works), that makes a huge difference in deciding where to allocate our capital. Many, many thousands of angels, “friends and family”, and professional investors across our great country feel exactly the same way. Collectively, we can put money to work quickly and efficiently at a time when government can’t and banks won’t.

Instead, we are back to government attempting to engineer where to spend, even though it’s a proven reality that a large portion of the spending is wasteful. This is yet another example of government hubris, where Washington takes your money because it thinks it can spend it better than you can.