The Wall Street Journal is reporting today that Barack Obama’s tax plan includes an increase in taxes on capital gains and income from investment dividends.

Sen. Obama outlined a plan Thursday to raise tax rates on capital gains and dividend income from 15% to 20% for individuals and families making more than $200,000 and $250,000, respectively. He also detailed a plan to levy payroll taxes on earnings above $250,000 at a rate between 2% and 4%, though that increase wouldn’t occur for at least a decade. Right now, payroll taxes, used to fund retirement benefits, are levied on income up to $102,000.

To put it simply, capital gains and dividends are the income you earn from your investments. With investors’ confidence in the market currently very low (The DOW closed yesterday more than 1600 points lower than it did a year ago.), it would seem counter-intuitive to give the people who have the money to invest any kind of disincentive to do so. And yet, a promise that 20% of any money they make will be taken from them will almost certainly do that very thing. Proposals like this demonstrate at least one of two things about Barack Obama:

1. He doesn’t understand basic economic principles. OR
2. He doesn’t care about the economy or how it affects people.

I happen to believe that Barack Obama does care about what happens to the American people, but it’s of little comfort since it suggests that he knows nothing about the economy or how to foster its growth. The same disincentive will undoubtedly be at work if he succeeds in raising payroll taxes, as it will encourage employers to refrain from giving their excelling employees raises in pay once they begin to approach the newly taxable bracket.

America is at a difficult crossroad this year. We aren’t electing a new president in a time of substantial prosperity or peace. The economy has been faltering for almost a year, and our current president seems to believe that nothing is wrong– that if he ignores the problem, historians will say he finished his term with a stable and flourishing economy. That we have chosen as the two major candidates to succeed him men who have no fundamental understanding of economics themselves is troubling. Whoever gets the job in November is going to have the problem of weak market confidence and tight-pursed employers when he assumes office in January. Americans should think long and hard about this, because we could turn this problem around in four years. Enduring it for another four, on the other hand, could be a disaster.