You would think that with one of the weakest economic recoveries on record President Barack Obama would be searching desperately for ways to promote economic growth. It is after all an election year. Most pundits and pollsters agree that its the economy stupid.
But instead Obama used his State of the Union speech to rail on about fairness inequality and redistribution. The Obama strategy is simple: Tax the rich because they dont pay enough.
The problem is that they do pay enough. According to the Tax Foundation Americans making $1 million or more pay a 25 percent average tax rate. People in the $50000 to $100000 income category -- call it the middle class -- pay 7 to 8 percent.
But no Obamas one big idea in his Tuesday night speech was a 30 percent minimum tax on millionaires. This by the way is really a hike in the capital gains tax. And this Obama penalty is aimed squarely at his likely election opponent Mitt Romney. Talk about taxing success. Talk about taxing growth.
The capital gains tax is the single most important economywide tax on wealth risk taking and investment. Its a tax on seed corn. What a brilliant idea Mr. President.
I remember the late Jack Kemp always saying you cant have successful capitalism without capital. But that wasnt in the presidents State of the Union.
Its not as though the economy is prepared to take another tax hit. The fourth-quarter gross domestic product report adjusted for inflation came in at a mediocre 2.8 percent. Wall Street promptly sold off on the news.
And were now 10 quarters into the tepid Obama recovery with its average quarterly growth rate of 2.4 percent annually.
Deep recessions are supposed to breed strong snap-back recoveries. But its not happening -- even after an $800 billion government spending package a $2 trillion Federal Reserve balance sheet expansion a zero Fed interest rate (for three years and counting) and a whole bunch of temporary targeted tax cuts.
Its the whole Keynesian bag of tricks but its still a very sub-par recovery.
Way back when Ronald Reagan used the supply-side model and rejected big-government Keynesianism. He permanently lowered marginal tax rates deregulated the economy went to a strong King Dollar that collapsed oil and gold prices and limited domestic spending (as a share of GDP). After 10 quarters of recovery the Reagan growth rate was 6 percent.
Compare that with Obamas 2.4 percent. Or compare Obamas 2.4 percent with the 4.6 percent post-World War II average recovery rate after 10 quarters. The average is twice as good as Obamas. But Obama is only roughly a third of Reagan. That tells you something.
On top of all this under current-law Obama policy the vitally important capital gains tax is going up even without the millionaires minimum. Next year the capital gains tax will revert to 20 percent from todays 15 percent. Then Obamacare will raise investment tax rates by 4 percent bringing us up to 24 percent. That equals an 11 percent rollback of wealth and growth incentives.
But thats not all because the capital gains tax is paid on top of the 35 percent corporate tax. So under Obama a 24 percent cap gains tax is really a 51 percent tax rate on capital.
As Romney found out even todays 15 percent cap gains tax is really a 45 percent double tax on top of the corporate levy. But theres a better way here: Slash the corporate tax rate and leave the cap gains rate alone until full-fledged tax reform can take place.
In other words increase incentives to grow and invest. Make it pay more after tax to invest and take risks. Thats a growth prescription the exact opposite of Obamas redistributionism.
Why is it fair or equal to create a lower tide that pulls down all boats?
I interviewed Romney on CNBC this week and its clear that he gets this. And as he aggressively argued in the Jacksonville Fla. debate he is proud of his success and doesnt want to give it back to the tax man.
More importantly Team Romney is cooking up a stronger tax-reform plan. Romney intends to broaden the base by getting rid of deductions exemptions and loopholes and then bring down the rates. I asked him whether the plan would be ready during the primary season. He said yes.
There is a growing consensus across the country for full-fledged reform of the personal and corporate tax codes. People yearn for simplicity competitiveness and new incentives. Obamas great mistake in the State of the Union was his lowball vision of class warfare and redistribution when the country wants growth measures.
This November well see a great debate between a big-government entitlement society that emphasizes fairness and a smaller-government growth society based on free market capitalism. Pro-growth tax reform is essential to this debate.
You would think that with one of the weakest economic recoveries on record President Barack Obama would be searching desperately for ways to promote economic growth. It is after all an election year. Most pundits and pollsters agree that its the economy stupid.
But instead Obama used his State of the Union speech to rail on about fairness inequality and redistribution. The Obama strategy is simple: Tax the rich because they dont pay enough.
The problem is that they do pay enough. According to the Tax Foundation Americans making $1 million or more pay a 25 percent average tax rate. People in the $50000 to $100000 income category -- call it the middle class -- pay 7 to 8 percent.
But no Obamas one big idea in his Tuesday night speech was a 30 percent minimum tax on millionaires. This by the way is really a hike in the capital gains tax. And this Obama penalty is aimed squarely at his likely election opponent Mitt Romney. Talk about taxing success. Talk about taxing growth.
The capital gains tax is the single most important economywide tax on wealth risk taking and investment. Its a tax on seed corn. What a brilliant idea Mr. President.
I remember the late Jack Kemp always saying you cant have successful capitalism without capital. But that wasnt in the presidents State of the Union.
Its not as though the economy is prepared to take another tax hit. The fourth-quarter gross domestic product report adjusted for inflation came in at a mediocre 2.8 percent. Wall Street promptly sold off on the news.
And were now 10 quarters into the tepid Obama recovery with its average quarterly growth rate of 2.4 percent annually.
Deep recessions are supposed to breed strong snap-back recoveries. But its not happening -- even after an $800 billion government spending package a $2 trillion Federal Reserve balance sheet expansion a zero Fed interest rate (for three years and counting) and a whole bunch of temporary targeted tax cuts.
Its the whole Keynesian bag of tricks but its still a very sub-par recovery.
Way back when Ronald Reagan used the supply-side model and rejected big-government Keynesianism. He permanently lowered marginal tax rates deregulated the economy went to a strong King Dollar that collapsed oil and gold prices and limited domestic spending (as a share of GDP). After 10 quarters of recovery the Reagan growth rate was 6 percent.
Compare that with Obamas 2.4 percent. Or compare Obamas 2.4 percent with the 4.6 percent post-World War II average recovery rate after 10 quarters. The average is twice as good as Obamas. But Obama is only roughly a third of Reagan. That tells you something.
On top of all this under current-law Obama policy the vitally important capital gains tax is going up even without the millionaires minimum. Next year the capital gains tax will revert to 20 percent from todays 15 percent. Then Obamacare will raise investment tax rates by 4 percent bringing us up to 24 percent. That equals an 11 percent rollback of wealth and growth incentives.
But thats not all because the capital gains tax is paid on top of the 35 percent corporate tax. So under Obama a 24 percent cap gains tax is really a 51 percent tax rate on capital.
As Romney found out even todays 15 percent cap gains tax is really a 45 percent double tax on top of the corporate levy. But theres a better way here: Slash the corporate tax rate and leave the cap gains rate alone until full-fledged tax reform can take place.
In other words increase incentives to grow and invest. Make it pay more after tax to invest and take risks. Thats a growth prescription the exact opposite of Obamas redistributionism.
Why is it fair or equal to create a lower tide that pulls down all boats?
I interviewed Romney on CNBC this week and its clear that he gets this. And as he aggressively argued in the Jacksonville Fla. debate he is proud of his success and doesnt want to give it back to the tax man.
More importantly Team Romney is cooking up a stronger tax-reform plan. Romney intends to broaden the base by getting rid of deductions exemptions and loopholes and then bring down the rates. I asked him whether the plan would be ready during the primary season. He said yes.
There is a growing consensus across the country for full-fledged reform of the personal and corporate tax codes. People yearn for simplicity competitiveness and new incentives. Obamas great mistake in the State of the Union was his lowball vision of class warfare and redistribution when the country wants growth measures.
This November well see a great debate between a big-government entitlement society that emphasizes fairness and a smaller-government growth society based on free market capitalism. Pro-growth tax reform is essential to this debate.
