Tuesday, January 24, 2012

The State of the Union is...

The President just finished his speech. What did we learn? Not much, sadly.

More of the same calls for tax reform: the middle class is getting punished, everyone should pay their "fair share, " and even a cameo for Warren Buffet's secretary.

The Positives: The President did comment on the continued discrepancy in out nation's taxation of corporations verses others, and the losses of American jobs and tax revenue to foreign nations based solely on corporate tax rates. This has to change, and I think it will, regardless of who is in the White House for the next term.

The Negatives: Of course Warren Buffet's secretary pays a higher effective tax rate than her boss. See my previous post.  To fix this, you would have to call every type of income: earned wages, investments, rents, etc.,  the same. This would punish the middle class even more, as their potential retirement savings would be hit with an additional penalty. That won't work.

Of course Mitt Romney is only going to have an effective tax rate of 14% or so.  He is a millionaire, and he makes his money through investments. The super rich are not the problem per se, they are just doing what is legal, and what everyone else wishes they could do: not work, and just watch their money grow.

The President has come out and said publicly that millionaires such as Romney should send at least 30% of their income to Washington, and GOP hopefully Gingrich has taken the other route, saying that investment income should not be taxed at all.

Without running the numbers, it is difficult to endorse either of those programs. However, with the current state of affairs, it is difficult to endorse the status quo. It will be interesting to see what policy ends up in effect.

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