How the economy can be booming before next Christmas.
President Obama told a sleepwalking America in his Democrat Convention Acceptance speech:
I won’t pretend the path I’m offering is quick or easy. I never have. You didn’t elect me to tell you what you wanted to hear. You elected me to tell you the truth. And the truth is, it will take more than a few years for us to solve the challenges that have built up over the decades.
But here is the actual truth, rather than a self-serving rationalization — with the right policies, America would be enjoying an historic boom before next Christmas, once again the world’s leading, most prosperous, superpower.
Let the Boom Begin
The boom would begin the day after Election Day, if Obama is defeated, and his party returned to minority status in both houses of Congress. Just as on Election Day, 1994, when the Republicans took over the Congress for the first time in 40 years, the stock market would immediately jump, on the expectation that President Romney and his new congressional majorities would reverse the neo-Marxist policies of Obama and his Che Guevara Democrats.
Obama told us at the Democrat convention that Romney and the Republicans are not telling us what their policies would be. “They want your vote, but they don’t want you to know their plan,” he said. But in fact they are running on probably the most detailed economic policies of any presidential campaign in history.
Romney has proposed a detailed tax plan, based on reducing tax rates. It is tax rates that powerfully affect economic growth, and particularly the capital investment that creates jobs and increases wages. That is because the tax rates determine how much of their production producers are allowed to keep. Lower rates consequently encourage greater production, and higher rates discourage production.
That is why Romney has proposed to cut income tax rates across the board for everyone by 20%. That is reminiscent of Reagan’s across the board cut of 25% in 1981 that was so dramatically successful, precisely for the reason just explained. Romney would also keep the Bush tax rates of 15% on capital gains and 15% on corporate dividends, which resulted in higher revenues when Bush reduced them, as well as all the other Bush tax cuts.
Contrary to Democrat mythology, those Bush cuts were heavily focused on low and moderate income workers, and the middle class. The bottom rate was cut by 33%, from 15% down to 10%, while the top rate was cut only by 13%, from 39.6% to 35%. Bush also doubled the child tax credit from $500 to $1,000. Both of these were very powerful in eliminating federal income taxation completely on the bottom 50% of income earners, and reducing the share of federal taxes paid by the middle 20% of earners to less than 5% of all federal income taxes by 2007. Those Bush tax cuts also reduced the middle class tax rate of 28% down to 25%, which Romney’s plan would further reduce all the way to 20%.
Romney’s plan would also eliminate federal income taxes completely on long-term capital gains, dividends, and interest income for middle class and lower income workers earning less than $100,000 and married couples earning less than $200,000. Denying these tax reductions to higher income workers in fact is counterproductive because they control so much more discretionary capital they can invest, or not. The taxes on capital gains, dividends, and interest are just unfair multiple taxation of investment income that is already taxed by the corporate and individual income taxes on the same investments. That just further discourages the investment essential to job creation and rising wages and incomes, all of which has disappeared under Obama and his Che Guevara Democrats. For these reasons, these multiple tax burdens should be eliminated for everybody.
Romney would also eliminate the death tax, which is just further multiple taxation of the capital involved in a lifetime of savings and investment that has already been taxed several times. That tax crushes many small business owners at death when they try to pass the family business on to their children, often forcing it to be sold just to pay the rapacious tax. Romney would abolish as well the hopelessly confused and misbegotten Alternative Minimum Tax (AMT). That tax was originally only supposed to stop the richest from avoiding any taxes, but now increasingly would apply to millions in the middle class, especially in high tax states like New York and California, which perversely results in higher federal income tax burdens as well under the AMT.
Then there are all the tax cuts that would result from Romney repealing Obamacare. That includes most importantly the individual mandate tax, upheld by the Supreme Court precisely because it is a tax. That mandate forces taxpayers to buy the expensive, politically correct health insurance not that they want to buy, but that Obama’s HHS Secretary Kathleen Sebelius decides they must buy. While Obamacare includes new health insurance welfare to help pay that cost soon for families making even over $100,000 a year, the net is still like a new payroll tax or income tax. And the new health insurance welfare entitlement is paid for by taxpayers too, of course, and so further represents increased taxes.
Then there is Obamacare’s employer mandate, still another effective tax, focused directly on jobs. The new costs on hiring imposed under that tax are already discouraging hiring, even among employers who currently provide health insurance to their workers, as under Obamacare employers will lose control over the cost of their health insurance, and have to pay for whatever Kathleen Sebelius decides they have to pay for.
In addition, Obamacare involves still another tax increase on investment, applying the Medicare payroll tax to capital gains, dividends and interest for the first time, and then increasing that tax by 62% on the nation’s job creators, investors, and successful small business owners. Then there are hundreds of billions in new Obamacare taxes on health insurance, medical devices, prescription drugs, even tanning salons, and others. Romney would be further cutting taxes by repealing Obamacare and all these tax increases.
The impact of these tax cuts on the budget would be offset first by the repeal of Obamacare. Second would be the impact of the tax rate cuts in restoring economic growth, which would produce new revenues to offset at least some of the revenue lost from the tax cuts. Romney has said as well that he would close loopholes and deductions in the tax code so that all the tax changes would be revenue neutral as a whole.
The great majority of deductions and loopholes in fact do benefit the higher income taxpayers, especially because the deductions are taken against higher rates at those higher income levels, and so result in bigger tax savings. Romney has said in fact that the loophole and deduction closings would focus on the higher income levels, so that “the rich” would not actually net any further tax cuts.
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