Romney's Tax Plan

     

I would like to put my two cents worth into the almost interminable comment on last Wednesday’s Presidential debate. In the first place, even though I have never been a supporter of President Obama, I do not think that he gave as bad an account of himself as both sides have suggested. To me he appeared to have grown and matured in office into something much more than the inexperienced but charismatic community organizer of four years ago.

On the whole, despite disagreeing with most of what he said, I thought the President did a good job but he was simply overwhelmed by the knowledge, experience, competence, and conviction of Gov. Romney. Romney showed that not only did he belong on the same stage as the President of the United States, but that he also belonged in the Oval Office.

On one occasion the President said that it’s just arithmetic or math. Nevertheless, few ever bother to do the math when trillions of dollars are involved. For example, the President as well as most commentators did not appear to grasp what Romney was getting at when he suggested that cutting tax rates was not the same thing as cutting taxes. Let’s look at Romney’s claim that cutting tax rates would not reduce Federal revenues but actually might increase federal revenues.

Federal tax rates use a graduated scale. There are currently six different tax rates: 10%, 15%, 25%, 28%, 33%, and 35%. Here’s how it works. Everyone pays 10% of the first $8700 of taxable income. Income from $8700 to $35350 is taxed at the 15% rate. The tax rate on income from $35350 to $85650 is then taxed at the 28% rate, and so on until the 35% rate is applied to income over $388000.

So, let’s use as an example, an unmarried taxpayer with a taxable income of $85650. Remember, taxable is adjusted gross income minus personal deductions. On the approximately $50000 of taxable income over $35350, this taxpayer would currently pay the 25% rate or $12500. Romney proposes reducing tax rates by 20%, which would bring our taxpayer’s rate down to 20% thereby reducing his tax to $10000. Romney’s plan would save our taxpayer $2500. Multiply that by millions of taxpayers and it adds up.

However, Romney proposes to offset that reduction by eliminating or scaling back some tax deductions or tax credits. Suppose the above taxpayer had a $20000 tax deduction for mortgage interest and real estate taxes. If he was only able to deduct half that amount, he would owe an additional $2500, thereby neutralizing his savings from the reduction in his tax rate.

If the taxpayer’s bill remains the same, and the government collects the same amount of tax, why even bother? In the first place, there is a question of fairness. A tax deduction is worth much more to a taxpayer in the 35% bracket than to one in the 15% bracket. Even Democrats don’t object to this inequity that favors the wealthy.

More importantly, lowering tax rates does stimulate the economy. Gov. Romney tried to explain it last Wednesday and I hope that his running mate will continue in the next debate. History is on their side.

Over 50 years ago, President Kennedy lowered tax rates and Federal revenues grew dramatically. President Reagan did the same thing with the same result when he took office. Finally, even the much-maligned Bush tax cuts did not reduce Federal revenues. In 2002 the government collected 1 Trillion dollars in income taxes and 1.88 Trillion in total revenues. By 2007 Federal income tax collections went up by 50% to over 1.5 Trillion dollars, and total government receipts exceeded 2.5 Trillion. In 2007 the total federal deficit was 160 Billion dollars, the same it had been in 2002. Only with the recession did income tax revenues go down to 2002 levels although total government receipts stayed higher.

Two final notes on the first debate:

First, commentators were shocked that President Obama did not bring up Gov. Romney's 47% comment. I can only guess that the President's advisors must have felt that Governor Romney was prepared to knock that one out of the park. Any major leaguer will knock a 95 mph fastball out of the park if he knows it's coming.

Second, I though that veteran newscaster Jim Lehrer did a fine job of moderating. He allowed the focus to stay on the candidates and kept himself in the background. It was the best debate I have ever watched, and Lehrer had a lot to do with it. ###

Romney's Gaffe

     

As far as I can find out, here is the full text of Mitt Romney’s remarks about the 47% that have caused such a furor.

"There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them.And they will vote for this president no matter what…. These are people who pay no income tax. Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect. So he’ll be out there talking about tax cuts for the rich. I mean, that’s what they sell every four years. And so my job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives. What I have to is convince the five to ten percent in the center that are independents, that are thoughtful, that look at voting one way or the other depending upon in some cases emotion, whether they like the guy or not."

Even though his remarks were off the cuff, let’s analyze them almost sentence by sentence. In the first place, no one can quibble with the observation that 47% of the people will vote for President Obama no matter what. That statement is very accurate.

However, he went wrong when he confused the 47% diehard Obama supporters with the 47% of the population that pays no income tax. A large percentage of diehard Democrats are not only taxpayers but also considerably wealthy. The tip of the Democrat iceberg is made up of wealthy plutocrats like George Soros and George Clooney. Right beneath them are a whole host of entertainers or commentators like the women who appear on “The View”. Beneath that elite group is a substantial lesser aristocracy of aging baby boomers who have made it in America. You only had to look closely as the cameras scanned the delegates in the background at the Democrat convention, to see the same fine clothing and jewelry that were evident at the Republican convention.

I know many of these people even though I find it hard to understand their politics. I live in Connecticut’s Fairfield County, one of the most well to do counties in the country. Parts of it are staunchly Republican but it will be very hard for Romney to carry the County and almost impossible for him to carry Connecticut, one of the most reliable blue states.

On the other hand many of the 47% who pay no federal income tax, do pay state and local income taxes, as well as considerable real estate taxes here in Connecticut. I believe that a large percentage of these people, many of whom are Senior citizens, vote Republican year after year. 

Although his off the cuff message was garbled Romney was correct to point out that there are many people who have become so dependent on government largess, that they can indeed be called victims. Take my neighboring town of Bridgeport, for example. It has been dominated by a Democrat political machine ever since I moved to Connecticut almost 50 years ago. Today it is one of the poorest cities in the state. The schools are in chaos, the murder rate is shocking, and even though taxes are high, the city has not been able to cover the cost of its own schools for years.

Despite poor conditions in cities like Bridgeport, its citizens will most certainly continue to vote Democrat. That is why Romney saw that there would be no point for him to try and gain their votes. When he said that it was not his “job” to be concerned about the dependent class, he was merely stating the obvious. He believed that nothing he could do to gain such traditional Democratic votes. He saw that he must concentrate on the so-called independents.

Even though I support Romney, I believe that he and other Republican politicians are wrong to write off the people who have been victimized by years of Democrat failed schemes and policies—people who have been victimized by party machines that enrich the few local politicians at the expense of the many. Why try to eke out a narrow victory when you can demonstrate to people the inadequacies of the policies of the past. Why write off states like New York and California where the poor labor under years of Democrat misrule?

I know people in Bridgeport who are trying to get out of the dependent class. It’s true that many live in subsidized housing and qualify for Medicaid and are also going to school on subsidized loans. But many go to school to get a better life for them and their children. Mitt Romney has succeeded at practically everything he has ever attempted. He was correct to argue that lower taxes mean little to the poor, but poorly performing schools, unsafe neighborhoods, and record high unemployment rates do matter to that section of the 47%. 

Romney's message could be simple. "We are the United States of America, not the Divided States of America. President Obama has been one of the most divisive Presidents in history. He has tried to divide the country in so many ways. He has pitted class against class and race against race. He has pitted Washington and the Federal government against the States of the Union. He has attacked and demonized anyone who has dared to oppose him. We are all in this together. My job is to get elected but once elected my job will be to once again unite this country and be President of all the people." ###

Romney prediction

                        

The other day a friend asked me who I thought would win the upcoming Presidential election. He was shocked when I replied that I thought that Mitt Romney would win in a landslide. My guess was based on my gut feeling as well as on a recent poll in Connecticut, a traditional very blue state. The poll showed that President Obama had only an eight-percentage point lead in a state he carried by twenty-three percentage points in 2008. If Obama’s showing is so poor in usually reliable Connecticut, how will he win in the toss up states so vital to victory in November?

I believe that the poll numbers are not only a recognition of Obama’s record but also an indication that the Republicans now have an extremely attractive candidate whose apparent negatives will be perceived by most people as positives.

The 2008 election showed that American politics have entered the age of American Idol. Incredibly in the Democratic primaries a totally inexperienced but extremely attractive candidate triumphed over Hillary Clinton and the established leaders of the Democrat party. In the ensuing election Barack Obama easily overwhelmed an aging John McCain.

However, in Mitt Romney the Republicans have found an attractive candidate of their own to put up against a floundering Administration that seems totally unable to understand or deal with the country’s economic woes. I must admit that I am a political conservative and that I do like Mitt Romney but here are a list of qualities that I think any observer would agree with.

1. Romney has an attractive appearance. He appears youthful and energetic both in person and on TV. His wife and family are equally attractive. Again, in the age of American Idol this quality cannot be underestimated. Obama has no advantage here.

2. At the same time Romney appears to be intelligent, experienced, and quite capable of handling the demands of the Presidency. It would appear that he has been successful in practically everything he has set his hand to. Never mind the Olympics, he managed to get elected as a Republican governor of one of the bluest states in the country. Even the critics of his career at Bain Capitol would have to admit that he was successful there.

3. No one can doubt that he showed great skill he winning one of the most grueling primary campaigns in memory. Those who question his campaign strategy and tactics should give him credit for knowing what he is doing. He is no dope. His selection of Paul Ryan as running mate was a masterstroke. Despite their immediate criticism of Ryan, some Democrats are so concerned that I believe there will be an attempt to replace bumbling Vice-President Biden with Hillary Clinton. Moreover, the Romney campaign is and will be extremely well funded unlike the McCain disaster. Obama will not have the overwhelming financial advantage he had in 2008.

4. Speaking of money Romney is wealthy and makes no bones about it. Independent voters are wise enough to understand that a rich person has a great incentive to protect the rights of private property so basic to our country’s health and freedom. They also know that many Democrat politicians are equally wealthy. If the election is about class warfare and divisiveness, the Democrats will lose.

5. I don’t think his religion will be a factor. I know very little about the beliefs of Mormons, but I once overheard a man say that he never met a Mormon he didn’t like. He seems to be a devoted family man. Again, Obama has no advantage here.

I like to comment on what’s going on and don’t usually like to make predictions but I will go out on a limb here. Barring some unforeseen circumstance, I believe that Mitt Romney will win in a landslide big enough to give him a mandate to get the country moving again in the right direction. ###