Democrats are fond of saying that Republicans rely too heavily on tax cuts in their economic proposals. In reality, Mitt Romney’s tax plan is not only tepid and incomplete, but he has neglected to expose the true destructiveness of Democratic policies.
Absent an effective Republican rejoinder, President Barack Obama gleefully mocks GOP tax prescriptions, including in his address to the Democratic National Convention: “Take two tax cuts, roll back some regulations, and call us in the mornin’,” the president quipped in that painfully pandering, g-droppin’ manner he sometimes deploys, to the admiration of Harry Reid.
Obama characterizes tax cuts as contrary to his concept of “citizenship” and detrimental to progress in fields from medicine to technology and beyond. It is emblematic of the modern Democratic Party, and the left in general, that a person can rise through its ranks, even to the office of president, while remaining ignorant of the demonstrable truth that lower tax rates often lead to economic growth and higher tax revenues.
A particularly nonsensical Democratic talking point is that lower taxes — “the Bush tax cuts,” in their misnomer — are “what got us into this mess in the first place.” But in the four years after 2003, when the second phase of Bush’s tax plan was enacted, tax revenues increased by over $700 billion. Romney’s refusal to point this out explains, in part, why he persistently trails in the polls.
And it is not as though the country’s tax burden is light. America has the highest corporate taxes in the world, while claiming a greater share of personal income than its largest trading partner, Canada — and Obama seeks to push these rates even higher.
Beyond the rates, the Byzantine nature of the U.S. tax system, including its worldwide reporting requirements, creates an expensive and inhospitable economic environment and disadvantages Americans overseas. Romney has offered a vague plan to eliminate the double-taxation of international U.S. businesses but, without specifics, even Joe Biden is comfortable disdaining it.
“It’s called a territorial tax,” the vice president scoffed to the DNC, with apparent confusion. This evinces an unfortunate American myopia, whereby something that is commonplace in the rest of the world is held up and marveled at like a glowing rock that fell from space. It is particularly galling in this case because the “territorial tax” Biden considers so otherworldly was, in fact, a key recommendation of Obama’s own Jobs Council.
This same blinkered perception applies to the tax burden on U.S. citizens living abroad. A record number of Americans renounced their citizenship last year and, if Obama is re-elected and enacts his massive tax hikes and expanded reporting requirements, the number of renunciations will increase. Invariably, such news brings howls of “good riddance” from “These-Colors-Don’t-Run” nincompoops who do not understand that their erstwhile compatriots are not dodging their taxes, but escaping anomalous, extra-territorial demands placed on them by the IRS. As a consequence of this institutional stance that U.S. citizens remain government property, wherever they reside in the world, Americans living abroad enjoy less financial freedom than ex-pats of the People’s Republic of China.
The solution is simple: American individuals and businesses should be required to file and pay taxes only in their country of residence — just like the citizens of almost every other nation on Earth. For all his economic acumen, Romney has not made this straightforward proposal.
But perhaps most troubling is Romney’s inability to translate Obama’s tax policy as it pertains to jobs.
Two-thirds of American companies are small businesses, known as Chapter-S corporations, and they pay taxes at the same rates as individuals. This is not widely understood by the general public, or by politicians — indeed, a senior Congressional Republican recently told me that half the House Budget Committee was unaware of this fact. Moreover, these small businesses create 70 percent of America’s new jobs.
So, when Obama talks of raising taxes on “millionaires and billionaires” or, equally absurdly, “those who can afford it,” he is saying he will raise taxes on small business. Whether he realizes this or not, one cannot know (and those who still suppose Obama’s brilliance precludes him making such rudimentary mistakes should consider the tax burden of the average Navy “corpse-man,” whether he is stationed overseas or in one of the 57 states). Either way, Obama’s plan cripples job-creation.
If Romney wants to win this election, he must clarify his tax proposals — while exposing Obama’s, as well.
Theo Caldwell, an international investor and broadcaster, has been a member of the New York Stock Exchange, the Chicago Board Options Exchange, the American Stock Exchange, and the Kansas City Board of Trade. He can be reached at theo@theocaldwell.com.
