Republican presidential candidate Mitt Romney is sending mixed signals on capital gains taxes.
Many of us realize Mr. Romney's troubles on the issue of health care. Specifically, RomneyCare passed while governor of Massachusetts, which included an individual mandate, a state insurance exchange, expanded government and higher costs.
But it's not just the health care issue that presents problems for Romney. Capital gains taxes are another challenge.
On the corporate side, Romney's recently released economic plan calls for cutting the corporate income tax rate to 25 percent. That's a positive step in making the U.S. corporate tax code more competitive internationally. And since the same rate applies, the corporate capital gains tax rate also would fall to 25 percent.
In terms of the individual income tax, which is paid by most businesses (for example, as sole proprietorships, partnerships, S Corps and LLCs), the Romney plan pledges to leave the current tax rates in effect, but only offers a vague promise of tax reform some time in the future. That means most businesses would not experience tax increases as proposed by President Obama. But the Romney plan also offers nothing in terms of income tax relief for small firms.
As for individual capital gains, the Romney economic plan says: "Mitt Romney will seek to make permanent the lower tax rates for investment income put in place by President Bush. Another step in the right direction would be a Middle-Class Tax Savings Plan that would enable most Americans to save more for retirement. As president, Romney will seek to eliminate taxation on capital gains, dividends, and interest for any taxpayer with an adjusted gross income of under $200,000, helping Americans to prepare for retirement and enjoy the freedom that accompanies financial security. This would encourage more Americans to save and to invest for the long-term, which would in turn free up capital for investment flowing back into the economy and helping to facilitate economic growth."
The Romney plan gets it right in that eliminating taxes on capital would boost incentives saving and investment. He should have added that it would be a big plus for entrepreneurship.
But there's a glaring question here: Why does the Romney plan only eliminate taxes on capital gains, dividends and interest for those earning under $200,000?
After all, it makes economic sense to eliminate such levies on upper-income earners as well, given that they would have expanded resources and incentives to take the risks - i.e., starting up, building and investing in businesses - that drive innovation, economic growth and job creation. There's no getting around the reality that these upper-income earners have the greatest ability to invest and aid the economy.
Of course, one could always say that at least his current plan is far better than what he favored during his losing 1994 Senate race against Ted Kennedy. In an October 28, 1994, story ("The 1994 Campaign: Massachusetts") covering a debate between Romney and Kennedy, New York Times reporter Adam Clymer noted: "Mr. Romney shifted on one issue tonight, saying he now opposed longstanding Republican proposals to reduce the Federal tax on capital gains."
At that time, the top individual capital gains tax rate stood at 28 percent, which was 87 percent higher than today's rate of 15 percent.
Let's hope that Romney has truly left that kind of thinking behind on capital gains taxes. He now wants to make permanent the top capital gains tax rate of 15 percent, as opposed to President Obama, for example, who wants to hike the top rate on upper-income earners to 20 percent - though he, too, has toyed with the idea of pushing the rate up to 28 percent.
The President, of course, is known for playing the class warfare game with tax policy. While clearly an improvement over what the President wants, by calling for eliminating capital gains, dividends and interest taxes on certain levels of income but not for those earning more than $200,000, Mr. Romney is flirting with, and in a real sense validating, class warfare tax policy. After all, sound economics, again, dictates that the biggest impact on the economy would come by eliminating all capital gains taxes, thereby making the U.S. a global magnet for attracting innovation-driving, economic-growth-enhancing and employment-boosting capital. The only reason to maintain destructive taxes on higher incomes, while eliminating such levels for everyone else, is all about politics.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Showing posts with label Romney. Show all posts
Showing posts with label Romney. Show all posts
Tuesday, September 20, 2011
Tuesday, September 13, 2011
Romney On Target on Energy ... for the Most Part
In his pursuit of the presidency, Mitt Romney has a variety of obstacles to overcome, most notably his own RomneyCare established in Massachusetts being a big government forerunner to ObamaCare at the national level. But on energy policy, Mr. Romney has struck the right tone in his economic plan, for the most part.
On the day he released his agenda, Romney had an op-ed summing things up in USA Today. On energy policy, Romney wrote: "The Obama administration has severely restricted domestic energy production. I will ensure we utilize to the fullest extent our nation's nuclear know-how and immense reserves in oil, gas and coal. By rationalizing and streamlining regulation, we will harness these resources everywhere it can be done safely, taking into account local concerns. A huge number of jobs are at stake. So, too, is the price of energy, which strongly influences economic growth. We are an energy-rich country that, thanks to environmental extremism, has chosen to live like an energy-poor country. That has to end."
Sounds good. What does his energy plan offer specifically? He offers a nine-point agenda:
First, Romney wants to streamline the regulatory process: "Toward that end, all permits and approvals for exploration and development should be issued according to fixed timelines with the availability of fast-track processes. Procedures for issuing permits should be consolidated so that businesses have a one-stop shop for approval of common activities." That, of course, would be a welcome change from the Obama delays and moratoria.
Second, Romney proposes to overhaul outdated laws that "trigger prolonged regulatory scrutiny and years of spurious litigation." This effort would include stopping the EPA's current effort to use the Clean Air Act to impose a costly cap-and-trade system on the U.S. economy. It is declared in the plan: "Romney will work to amend the Act and remove carbon dioxide from its purview." Indeed, the EPA's agenda, including imposing CO2 emission caps, threatens to hike energy costs dramatically, and severely undermine U.S. entrepreneurship, business, competitiveness and jobs.
Third, Mr. Romney proposes updating the inventory of U.S. energy resources. In the plan, it's pointed out: "Surveys and inventories of resource deposits are decades out of date-when they have even been done at all. As a result, we have only a partial picture of the opportunities available to us. A Romney administration will conduct a comprehensive survey of our untapped resources so that policymakers and developers have a full picture from which to work." This is common sense, and the fact that it has not occurred, and is not updated regularly, is a glaring, shameful example of unwarranted influence by radical environmentalists over policymaking.
Along these lines, fourth, the Romney plan would "permit drilling wherever it can be done safely, taking into account local concerns. This includes the Gulf of Mexico, both the Atlantic and Pacific Outer Continental Shelves, Western lands, the Arctic National Wildlife Refuge, and off the Alaska coast. And it includes not only conventional reserves, but more recently discovered shale oil deposits as well." This dramatic shift in policy would be a clear positive for U.S. businesses and consumers in terms of energy prices and reliability, not to mention new business and job creation in the energy sector.
Fifth, the Romney plan calls for working closely with Canada and Mexico to develop energy resources, including "ensuring rapid progress on the Keystone XL Pipeline," and paving "the way for the construction of additional pipelines that can accommodate the expected growth in Canadian supply of oil and natural gas in the coming years." Again, a smart step that would present tremendous benefits for the U.S. economy.
Sixth, the Romney plan notes the enormous recent finds in natural gas in the U.S., the importance of "fracking" to extract those resources, and that "states have carefully and effectively regulated the process for decades." Here is another critical difference compared to current energy policymaking. For example, it is stated in the Romney plan: "While fracking requires regulation just like any other energy-extraction practice, the EPA in a Romney administration will not pursue overly aggressive interventions designed to discourage fracking altogether."
Unfortunately, the Romney plan cannot resist the temptation to spend tax dollars on energy subsidies. Typically, the case for subsidies is dressed up as long term investments, and that is the case in this plan as well.
So, point seven on the Romney energy plan declares: "Government funding should be focused on research and development of new energy technologies and on initial demonstration projects that establish the feasibility of discoveries."
And the final point adds that "the main line of policy should be directed toward technologies that will replace imported oil with domestically produced fuels or electric power," and that funding should come from "non-political sources." Of course, in the end, all spending by government is political, and no sound economic reason exists that government should be involved in subsidizing such speculative ventures. It's nothing more than a waste of taxpayer dollars, as the free market is more than capable of research, inventing and innovating.
In the end, though, especially compared to current policies, the Romney plan would be a dramatic improvement in U.S. energy policy.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
On the day he released his agenda, Romney had an op-ed summing things up in USA Today. On energy policy, Romney wrote: "The Obama administration has severely restricted domestic energy production. I will ensure we utilize to the fullest extent our nation's nuclear know-how and immense reserves in oil, gas and coal. By rationalizing and streamlining regulation, we will harness these resources everywhere it can be done safely, taking into account local concerns. A huge number of jobs are at stake. So, too, is the price of energy, which strongly influences economic growth. We are an energy-rich country that, thanks to environmental extremism, has chosen to live like an energy-poor country. That has to end."
Sounds good. What does his energy plan offer specifically? He offers a nine-point agenda:
First, Romney wants to streamline the regulatory process: "Toward that end, all permits and approvals for exploration and development should be issued according to fixed timelines with the availability of fast-track processes. Procedures for issuing permits should be consolidated so that businesses have a one-stop shop for approval of common activities." That, of course, would be a welcome change from the Obama delays and moratoria.
Second, Romney proposes to overhaul outdated laws that "trigger prolonged regulatory scrutiny and years of spurious litigation." This effort would include stopping the EPA's current effort to use the Clean Air Act to impose a costly cap-and-trade system on the U.S. economy. It is declared in the plan: "Romney will work to amend the Act and remove carbon dioxide from its purview." Indeed, the EPA's agenda, including imposing CO2 emission caps, threatens to hike energy costs dramatically, and severely undermine U.S. entrepreneurship, business, competitiveness and jobs.
Third, Mr. Romney proposes updating the inventory of U.S. energy resources. In the plan, it's pointed out: "Surveys and inventories of resource deposits are decades out of date-when they have even been done at all. As a result, we have only a partial picture of the opportunities available to us. A Romney administration will conduct a comprehensive survey of our untapped resources so that policymakers and developers have a full picture from which to work." This is common sense, and the fact that it has not occurred, and is not updated regularly, is a glaring, shameful example of unwarranted influence by radical environmentalists over policymaking.
Along these lines, fourth, the Romney plan would "permit drilling wherever it can be done safely, taking into account local concerns. This includes the Gulf of Mexico, both the Atlantic and Pacific Outer Continental Shelves, Western lands, the Arctic National Wildlife Refuge, and off the Alaska coast. And it includes not only conventional reserves, but more recently discovered shale oil deposits as well." This dramatic shift in policy would be a clear positive for U.S. businesses and consumers in terms of energy prices and reliability, not to mention new business and job creation in the energy sector.
Fifth, the Romney plan calls for working closely with Canada and Mexico to develop energy resources, including "ensuring rapid progress on the Keystone XL Pipeline," and paving "the way for the construction of additional pipelines that can accommodate the expected growth in Canadian supply of oil and natural gas in the coming years." Again, a smart step that would present tremendous benefits for the U.S. economy.
Sixth, the Romney plan notes the enormous recent finds in natural gas in the U.S., the importance of "fracking" to extract those resources, and that "states have carefully and effectively regulated the process for decades." Here is another critical difference compared to current energy policymaking. For example, it is stated in the Romney plan: "While fracking requires regulation just like any other energy-extraction practice, the EPA in a Romney administration will not pursue overly aggressive interventions designed to discourage fracking altogether."
Unfortunately, the Romney plan cannot resist the temptation to spend tax dollars on energy subsidies. Typically, the case for subsidies is dressed up as long term investments, and that is the case in this plan as well.
So, point seven on the Romney energy plan declares: "Government funding should be focused on research and development of new energy technologies and on initial demonstration projects that establish the feasibility of discoveries."
And the final point adds that "the main line of policy should be directed toward technologies that will replace imported oil with domestically produced fuels or electric power," and that funding should come from "non-political sources." Of course, in the end, all spending by government is political, and no sound economic reason exists that government should be involved in subsidizing such speculative ventures. It's nothing more than a waste of taxpayer dollars, as the free market is more than capable of research, inventing and innovating.
In the end, though, especially compared to current policies, the Romney plan would be a dramatic improvement in U.S. energy policy.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Wednesday, September 07, 2011
Kerrigan Talks Small Business and Job Creation on CSPAN
SBE Council President & CEO Karen Kerrigan talked about jobs, the economy, President Obama's upcoming jobs speech, and Republican presidential candidate Mitt Romney's jobs plan on CSPAN's Washington Journal, September 7. She responded to telephone calls and electronic communications from viewers.
SBE Council will analyze President Obama's plan for job creation and getting the economy growing again. Keep checking back on the BusinessTrends blog, or visit our website at www.sbecouncil.org.
SBE Council staff post.
SBE Council will analyze President Obama's plan for job creation and getting the economy growing again. Keep checking back on the BusinessTrends blog, or visit our website at www.sbecouncil.org.
SBE Council staff post.
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