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Final presidential debate: Unanswered questions
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My Dream Candidate is Obamney
I’m still undecided. On almost all issues I side with Obama, but when it comes to the economy and tax policy I think I get Romney’s vision and believe in it. He gave 4 details last night that are simple and powerful:
First, no capital gains taxes for people making less than $200k. In that scenario people should invest as much as they possibly can into the country through the real estate market or the stock market. This would ensure you start building a retirement nest egg that keeps you independent of government and that people are stimulating the economy from the ground up. That one move encourages saving and investment rather than consumption all in one shot.
Second, cap deductions at some scale that phases out with income, but keep all types of deduction options (mortgage, education, capital losses, state taxes, etc.) open. So the good part is a renter with kids can deduct education, and a home owner with no kids can deduct a mortgage, but up to the cap. The bad part is upper middle class to high income earners will pay more from the ability to take fewer deductions from an absolute value perspective. While an individual high income earner who takes few deductions today may see his/her tax go down, in aggregate the high earners with lots of deductions will average them out so that the net change is zero – the top 5% of earners still will pay 60% of the taxes.
Third, cut everyone’s tax rates by 20%. For high income earners this would be net neutral or result in higher taxes because of fewer deductions. But for small businesses like sole proprietors they’ll have more cash to hire people and grow. The net effect on tax revenue will either go down or stay the same depending on how many new people come back to the workforce (drop in unemployment rate) and how the income level of existing tax payers goes up with a growing economy. Romney must be making assumptions he can achieve a reduction in unemployment rate and a wealth creation effect for existing taxpayers that would offset the dip in tax revenue.
Fourth, bring in more revenue from increased international trade in 2 ways: increase trade to Latin America which is growing at double digits and stop unfair competition from China by cracking down on currency manipulation and intellectual property theft.
So what’s missing? He can’t pay for all of it without cutting taxes less than 20%, making unpopular choices like taxing the employer paid portion of medical and dental benefits, raising capital gains tax rates for high earners, or making very optimistic assumptions about the reduction in unemployment and the creation of individual wealth. It would kill his election chances to pick one of the unpopular choices now, and he seems to have a history of getting a bipartisan group together to make decisions like these vs. forcing one through.
Bottom line is whether you believe Romney can reduce deficits by increasing revenue from 1) reducing unemployment, 2) increasing individual wealth, and 3) increasing foreign trade, or whether Obama can reduce deficits by 1) increasing government revenue collection from high earners, 2) selecting industries to stimulate with these revenue dollars, and 3) paying down the deficit directly with tax dollars.
The problem with Obama’s plan is that he is taking money from ourselves to stimulate ourselves. Romney is using the crowdsourcing/kickstarter concept to let the population pick investments they think are growing, and is also pledging to bring more income from international trade. Romney has balanced budgets at least 3 times but Obama has not balanced one yet. Both want to do the right thing for America but Romney has the better financial track record and a better bipartisan leadership record.
On economy I vote Romney, on everything else I vote Obama. It all comes down to how heavily I’ll weight the economy as an issue on voting day.
My dream candidate is Obamney.
First, no capital gains taxes for people making less than $200k. In that scenario people should invest as much as they possibly can into the country through the real estate market or the stock market. This would ensure you start building a retirement nest egg that keeps you independent of government and that people are stimulating the economy from the ground up. That one move encourages saving and investment rather than consumption all in one shot.
Second, cap deductions at some scale that phases out with income, but keep all types of deduction options (mortgage, education, capital losses, state taxes, etc.) open. So the good part is a renter with kids can deduct education, and a home owner with no kids can deduct a mortgage, but up to the cap. The bad part is upper middle class to high income earners will pay more from the ability to take fewer deductions from an absolute value perspective. While an individual high income earner who takes few deductions today may see his/her tax go down, in aggregate the high earners with lots of deductions will average them out so that the net change is zero – the top 5% of earners still will pay 60% of the taxes.
Third, cut everyone’s tax rates by 20%. For high income earners this would be net neutral or result in higher taxes because of fewer deductions. But for small businesses like sole proprietors they’ll have more cash to hire people and grow. The net effect on tax revenue will either go down or stay the same depending on how many new people come back to the workforce (drop in unemployment rate) and how the income level of existing tax payers goes up with a growing economy. Romney must be making assumptions he can achieve a reduction in unemployment rate and a wealth creation effect for existing taxpayers that would offset the dip in tax revenue.
Fourth, bring in more revenue from increased international trade in 2 ways: increase trade to Latin America which is growing at double digits and stop unfair competition from China by cracking down on currency manipulation and intellectual property theft.
So what’s missing? He can’t pay for all of it without cutting taxes less than 20%, making unpopular choices like taxing the employer paid portion of medical and dental benefits, raising capital gains tax rates for high earners, or making very optimistic assumptions about the reduction in unemployment and the creation of individual wealth. It would kill his election chances to pick one of the unpopular choices now, and he seems to have a history of getting a bipartisan group together to make decisions like these vs. forcing one through.
Bottom line is whether you believe Romney can reduce deficits by increasing revenue from 1) reducing unemployment, 2) increasing individual wealth, and 3) increasing foreign trade, or whether Obama can reduce deficits by 1) increasing government revenue collection from high earners, 2) selecting industries to stimulate with these revenue dollars, and 3) paying down the deficit directly with tax dollars.
The problem with Obama’s plan is that he is taking money from ourselves to stimulate ourselves. Romney is using the crowdsourcing/kickstarter concept to let the population pick investments they think are growing, and is also pledging to bring more income from international trade. Romney has balanced budgets at least 3 times but Obama has not balanced one yet. Both want to do the right thing for America but Romney has the better financial track record and a better bipartisan leadership record.
On economy I vote Romney, on everything else I vote Obama. It all comes down to how heavily I’ll weight the economy as an issue on voting day.
My dream candidate is Obamney.
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