Yesterday, I noted how the proposed new Medicare payroll tax is on the verge of being raised for the second time even before being passed into law. Today brings word that in order to appease unions and reduce the impact of the tax on high-end insurance policies, Democrats are considering applying the new Medicare tax to investment income as well as wages, the Wall Street Journal reports. Applying the new Medicare tax to investment income would have similar economic effects as raising the capital gains tax in terms of reducing incentives for individuals to invest. The capital gains tax is already scheduled to rise to from 15 percent to 20 percent next January as the Bush tax cuts expire. This new investment tax would raise that effective rate even higher.

During an April 2008 debate with Hillary Clinton before the Pennsylvania primary, candidate Obama was asked why he supported a capital gains tax hike even though history shows that raising the tax on investments actually results in less revenue. He responded that he supported such a tax hike “for purposes of fairness.” Video below.