Transcript: Obama and Clinton Debate

In fact, I don't think we've really done very much at all yet in dealing with a way of freezing home foreclosures, of freezing interest rates, getting money into communities to be able to withstand the problems that are cause by foreclosures.

Governor Rendell has done a great job in Pennsylvania. He saw this coming. And unlike our current president, who either didn't know it or didn't care about it, he has really held the line. And Pennsylvania has been much less affected by home foreclosures.

But the president hasn't done that. And what I have proposed would do that. So, you've got to look at the entire economy. And from my perspective, yes, taxes is a piece of it. But you've got to figure out what is it we would invest in that would make us richer and safer and stronger tomorrow, which would help everybody.

GIBSON: I'm going to go to commercial break. But I just want to come back because of one thing you said. And I want to be clear, the question was about capital gains tax. Would you say, no, I'm not going to raise capital gains taxes?

CLINTON: I wouldn't raise it above the 20 percent, if I raised it at all. I would not raise it above what it was during the Clinton administration.

GIBSON: If I raised it at all. Would you propose an increase in the capital gains tax?

CLINTON: You know, Charlie, I'm going to have to look and see what the revenue situation is. You know, we now have the largest budget deficit we've ever had, $311 billion. We went from a $5.6 trillion projected surplus, to what we have today, which is a $9 trillion debt. I don't want to raise taxes against on anybody.

I'm certainly against one of Senator Obama's ideas, which is to lift the cap on the payroll tax, because that would impose additional taxes on people who are educators here in the Philadelphia area, or in the suburbs, police officers, firefighters and the like.

So I think we have to be very careful about how we navigate this. So the $250,000 mark is where I'm sure we're going. But beyond that, we are going to have to look and see where we are.

GIBSON: Very quickly, because I owe Senator Clinton time, but do you want to respond?

OBAMA: Well, Charlie, I just have to respond real quickly to Senator Clinton's last comment. What I have proposed is that we raise the cap on the payroll tax because millionaires and billionaires don't have to pay beyond $97,000 a year. That is where it is capped.

Now, most firefighters, most teachers, you know, they're not making over $100,000 a year. In fact, only 6 percent of the population does.

And I've also said that I'd be willing to look at exempting people who are making slightly above that.

But understand the alternative is that, because we're going to have fewer workers to more retirees, if we don't do anything on Social Security, then those benefits will effectively be cut because we'll be running out of money.

GIBSON: But, Senator, but that's a tax. That's a tax...

OBAMA: Well, no, no, look...

GIBSON: ... on people under $250,000.

OBAMA: Let me finish my point here, Charlie. Senator Clinton said she certainly wouldn't do this, this was a bad idea. In Iowa, when she was outside of camera range, said to an individual there she'd certainly consider the idea and then that was recorded. And she apparently wasn't aware that it was being recorded.

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