In my last blog piece I said I would talk about ways of attacking Labour in this one, but recent developments across the Atlantic have led me instead to comment on the U.S election as it enters its final phase. I will discuss the original topic next week.
When it comes to who to back for President, even I am a little torn. For all McCain’s economic strengths and conservative values, my personal view that the invasion of Iraq was disastrously misguided at the time it happened, has only been strengthened by its continuing aftermath. At least Obama would get the troops out soon. But then (to say nothing of his pro-abortion record) I look at Obama’s tax policies and I am certainly not encouraged.
“Europeans call it socialism, Americans call it welfare, and Barack Obama calls it change.”
These are the words of John McCain’s adviser Doug Holtz-Eakin. He was commenting on the recently discovered recording of a 2001 radio interview in which Obama lamented that the Civil Rights Movement had failed to achieve what he called “major redistributive change.”
If you want to know what Mr Obama means by that, take a look at his tax policies.
His gross tax hike would total $103.3 billion in 2011. That would be the largest single-year increase since World War Two and the fifth largest since the War as a share of GDP.
For those in the top two brackets, Obama would reverse the income tax cuts of 2001 and 2003. That would increase the top two marginal rates to 36 and 39.6 per cent from 33 and 35, giving the U.S. a higher top rate than Canada, the Czech Republic, Denmark, Finland, Hungary, Iceland,
South Korea, Luxembourg, Mexico, New Zealand, Norway, Slovakia, Spain, Sweden, Switzerland, and Turkey.
Investors would also be hit. Capital gains and dividend taxes would go up with Obama from 15 to 20 per cent for anyone making more than $250,000 (McCain would keep them at 15).
In the wake of a stock market crash, this does not strike me as a good way to encourage a recovery. Much of the money America’s economy desperately needs would fly abroad to lighter tax regimes.
McCain, by contrast, would slash US corporation tax – now the second highest in the world – by 10 per cent, giving a battered economy a much-needed boost; Obama would leave it where it is at 35.
And of course, as we know only too well this side of the pond from bitter experience under Labour governments of yore, swingeing increases in top rates of tax end up putting less money into Treasury coffers. The rich pay their accountants to exploit loopholes. Or simply emigrate.
As ever, the middle classes bear the brunt.
As for Obama, it is hard to better Holtz-Eakin’s summary of his “basic goal” as “taking money away from people who work for it and giving it to people who [he] believes deserve it.”
But if McCain really wants to connect with voters on tax, he should “go large” on his radical plan for a simplified system. He wants to give people the option of just two rates, with larger deductions and exemptions.
That has the great virtue of clarity. It’s easy for voters to grasp.
Might there be some lessons here for British Conservatives?
(Source: Americans for Tax Reform, citing OECD Tax Database: http://www.atr.org/content/pdf/2008/August/082508pr-ObamaMcCain%20Matrix.pdf).