President Obama’s response to the continued-weak economy and nonexistent job growth is seemingly limited to giving angry speeches, and offering vague plans that don’t address the situation. He called a joint session of Congress to deliver a speech in which he would reveal the details of his long-awaited “American Jobs Act”. He insisted that Congress “pass it right away”—but it didn’t actually exist yet. Now he has latched onto the “Buffett rule”, and a deliberately deceptive representation of the current tax code. Campaigning on a promise of tax hikes is political suicide.
The GOP lacks a unified voice to respond to this. This is not a surprise—they are not unified. One of the key reasons the “Tea Party” came into existence was frustration with a rudderless GOP. Romney and Perry are presenting very different views on entitlement reform and other crucial issues. Since there is no consensus, it presents an opportunity for a candidate to exploit that vacuum and create the theme for 2012. The next GOP nominee will be the one that best articulates a winning vision of the future. A response that outlines an alternative agenda, with a specific set of policy alternatives, could propel a GOP candidate into the nomination. It would look like this:
Our economy is still stagnant, with high unemployment and $4 gas. A “double dip” is possible. President Obama has responded with more speeches. His latest strategy is based on the musings of Warren Buffett. His proposal will feature what he calls “The Buffett Rule”. He claims he wants to hike taxes on “millionaires and billionaires” but he has repeatedly called for tax hikes on those making more than $200,000.
Warren Buffett and the president are intentionally misleading the American people. They are suggesting that income tax rates and capital gains tax rates are the same thing. They’re not—and the president knows it. The left-leaning media is not eager to clear this up, so I will.
Many have suggested that Warren Buffett simply soothe his guilt by writing a check to the U.S. Treasury—but that misses the point. We want Warren Buffet to continue to invest in the best American companies. As much as I’d like Mr. Buffett to back up his words with actions, I think the proper response is to look at our tax code.
The U.S. already has a very progressive income tax code with the top earners paying 35%. IRS statistics show that the top 1% is paying 39% of all income taxes. Virtually every dime we invest is left over from income that has already been taxed. We tax long-term capital gains at a lower 15% rate for very important reasons. We want to encourage investment, and we want investors to feel they can move their capital to a new investment without being trapped by the tax code. This is essential to the formation of new businesses and the growth of the economy.
When Warren Buffett buys stock in a company he is providing the seeds for growth. With that infusion of capital, young businesses can build new plants and hire new employees. This is precisely where jobs come from—not failed government programs. I want Warren Buffett and other experienced financiers investing that money. When government reallocates that money we get scandals like Solyndra.
When tax time rolls around Warren Buffett behaves like every other tax payer. He takes steps to keep his tax bill as low as legally possible. He limits himself to a $100,000 salary to avoid the income tax he wants to impose on others. He holds his investments for the long haul to avoid the higher, short-term capital gains tax rate. He avoids paying lots of unnecessary brokerage commissions. Investors should emulate what Mr. Buffett does—and ignore what he says when he is making political speeches.
President Obama says he want to raise taxes on the rich—but there just aren’t enough of them around to pay for his spending surge. If we don’t significantly cut spending, the certain outcome is higher taxes, especially on the middle class. For too long, politicians of all stripes have avoided making the tough decisions where spending is concerned. The 25% increase in spending we’ve seen under the Obama administration makes that easy. I suggest a “last in / first out” method to eliminate entire programs. I’ll start by repealing Obamacare. Democrats are eager to return to the tax rates of the Clinton era. Fine, let’s match that with a return to the spending levels of that era; levels held in check by a Republican Congress.
The clear alternative to the toxic policies of the Obama administration, and the Democrat-controlled congress, is to foster a pro-business climate in America. Our corporate tax rate is among the very highest. If we want to compete globally, and stop outsourcing jobs, we need to lower it. We need to keep the capital gains tax rate low for reasons already outlined. Even President Clinton knew this, which is why he lowered that rate from 28% to 20% in 1997. The economy boomed and revenues increased. In 2008, candidate Obama rejected this economic truth when he famously told Charlie Gibson he’d raise capital gains tax rates for reasons of “fairness.”
Studies have shown that when top tax rates were as high as 90% under FDR, or as low as 28% under Ronald Reagan, the income tax revenue collected stubbornly remained around 8% to 9% of our nations GDP. When top tax rates were lowered under Presidents Coolidge, Kennedy, Reagan and Bush, revenues increased. Revenue reductions have always been a result of recessions—so let’s stop having them. Let’s stop punishing the job creators and unleash their entrepreneurial spirits. Let’s stop practicing class warfare and the politics of envy, and focus on the economic freedoms that have made this country great. Free-market capitalism has been the growth engine of this country since its founding. The bailouts and tax loopholes are cronyism—not capitalism. We see that in evidence now with the Obamacare waivers for the president’s chosen favorites.
The flat tax is working around the globe. Countries that struggled under Soviet oppression and centralized planning are thriving now. We can simplify our tax code and eliminate the loopholes and provisions for special-interest groups.
We know the best way to increase revenues is to get the economy growing. We can ignite this economy with a spark from the energy sector. This sector has not just been neglected by the Obama administration—it has been targeted for destruction. Drilling bans, an out-of-control EPA, green-energy boondoggles and a weak dollar policy have resulted in $4 gas across the nation. By tapping our vast domestic energy sources we can create real jobs that can’t be outsourced. That will increase revenue to help close budget gaps. Lower prices at the pump will help everyone, from commuters to businesses that have struggled with increased transportation costs. We’ll help stave off the inflation that is already hindering our economy. Maybe most importantly, we’ll stop sending our dollars overseas to nations that harbor terrorists.
President Obama’s policies have failed. He wants to continue down that path. We need to go forward. We know what works. Low tax rates, restrained spending and pragmatic energy policies will foster an environment in which businesses create jobs. America has been a 200+ year experiment in economic freedom. Let’s throw off the economic shackles the Obama administration has strapped on us and make America great again.