Capital Gains Tax Rate – Just Leave It Alone

There has been a lot of talk about the tax rates of Warren Buffet, Mitt Romney, and President Obama.  Most people don’t remember this, but when then Senator Obama ran for office, he said was going to pay for all his campaign promises by ending both wars (Iraq & Afghanistan), increasing taxes on the rich (by letting the Bush tax cuts expire), and increasing the capital gains tax rate.

Income made on investments get taxed at a 15% rate vs. income from a job, which reach as high as 35%.  However, when Obama got into office, there was a recession going on, which crushed our stock market.  Essentially, there were little capital gains to tax, they wanted to encourage people to invest in companies, and a tax hike on capital gains in his first year during a recession would have been toxic politically.

Now that the dust has settled and we are seeing a small recovery, President Obama wants to increase taxes on capital gains and on the rich as he goes back into campaign mode.  Adversely, some Republicans and conservative blogs say that we should get rid of capital gains to increase the incentive to invest in the marketplace.  I believe the government does play a role in producing an environment that promotes economic growth, but they also need to be careful about putting too big of incentives on either side so as not to disrupt the balance of reasonableness and the power of the free market.

I do not believe we should increase the capital gains tax rate because for the majority of Americans, it is double taxation.  We get taxed when we earn income from our jobs, and then that money gets taxed again if we make any money with it on an investment (note: that same money gets taxed a third time when you die).  Further,  I think it is good to have an incentive (lower taxes) for people to invest in companies.  Financial investments in corporations lead to hiring, innovation, and profits.

It is not good policy in my mind, to promote too much risk by having a 0% tax rate on capital gains.  Too many people would try to make all of their money on investments so they do not have to pay taxes, which could be dangerous at the macro level.  Investing in the stock market is no guarantee and can be extremely risky.  If you don’t believe me, ask the thousands that had to come out of retirement because their portfolio shrunk to nearly nothing when the recession hit.

The current 15% capital gains tax is fine in my mind — not too high, not too low.  I definitely think we can talk about capital gains tax rates if we are talking about restructuring the entire tax code, but it is a low priority topic right now in my mind.

Will Rick Perry Will Be the Next President?

Are you looking for a strong conservative candidate? While he has only been running for office for one day, here are some things that Rick Perry is doing well.

Be Positive:

For those of you who know me well, you’ll know that I worked for Governor Tim Pawlenty back in Minnesota and have the utmost respect for the man.  Today, he dropped out of the race because his team did not see a path to victory.  I personally believe the number one reason people did not rally around him is because he focused on the now instead of painting a bright picture.

Pawlenty often told the truth about the crisis we are in and instead of rallying people, it just kind of depressed people.  Mitt Romney and Michelle Bachmann have excited people by talking about how much they dislike Obama and how they are going to get him out of office.  This excites the kind of person who goes to the caucuses, but not the average Joe.

In 2004, John Kerry tried to rally the democrats by saying how bad George W. Bush was and he lost.  Instead of running on how great the world is going to be when he is president, he focused on the negatives of Bush.  Obama on the other hand, talked about how glorious the future would be if he were president and people ate it up.  People actually believed that he’d get rid of politics in Washington D.C.!

The fact remains that being positive leadership motivates people and Perry’s belief in the American dream and the way he talks about how our country’s brightest days are in front of us will catch on with Republicans and Independents.

Results:

Although it is not mandatory to have past results to win a presidential election (see Barack Obama), having the right results in the area that people care about matter.  Since the beginning of our economic “recovery,” Texas has produced roughly 40% of the jobs in this country, all under Governor Perry’s belt.  The general population does not care about the debt limit as much as they do jobs and he has a good story to tell.  Further, Perry has over 10 years experience as governor of one of the largest states.

On the other hand, Barack Obama cannot talk talk about hope and change, because people are tired of waiting.  Unemployment is up, the market is unsteady, consumer confidence is down, and the polls indicate that people do not feel we are going in the right direction.  He does not have any results.

Likability:

At the end of the day, people often vote for who they like.  Perry’s positive demeanor is much more likable than some of the other candidates.  Simple question: when is the last time you saw Romney, Bachmann, or Obama smile?  All of Perry’s competition seems bitter and upset.

Perry is the only Republican candidate that is liked by the Tea Party, the social conservatives, and fiscal conservatives.

Competition:

Mitt Romney’s record as Governor is not amazing.  His signature legislation is Romneycare, which has been a travesty.  Additionally, he is vulnerable in my mind because he was better at creating wealth than creating jobs.  Most of his experience was buying out companies, splitting them up, and making a profit off the parts of the company that had value.  He will be portrayed as a rich Republican that does not care about anyone.

Bachmann has no real accomplishments.  She has not authored any key legislation; she has pretty much just voted “No” on everything.

President Obama’s approval rating today posted at an all-time low of 39% today (with 54% disapproving), according to a gallup poll.  He has not taken a leadership role in many tough situations and his policies have simply not worked.  The economy is in trouble and the electorate are skeptical of Obama’s plans for the future.

A lot can happen between now and November 2012, but I think Perry will most likely win.  I am not officially endorsing Perry yet, but logically looking at it, Perry, who has never lost an election, seems to be the likely candidate!