ARTICLES


Why lower taxes matter? 

9/24/2016

If you are paying attention to Fox News, MSNBC, or CNN  this election cycle is about Secretary Hillary Clinton's emails and real estate magnate Donald Trump's bombastic and sometimes offensive statements. This coverage is obfuscating the underlying debate on taxes, and more specifically—why lower taxes matter?

According to the Cato Institute Trump's tax plan is better than what exists today, with three basic categories: less than $75,000 is 12%, between $75,000 and $225,000 is 25%, and greater than $225,000 is 33%. Carried interest will be taxed as normal income, hitting hedge funds, and the 3.8% tax on investment for Obamacare will be repealed. Here we can see that Trump is clearly lowering taxes. 

Hillary's plan includes a surtax on individuals with greater than $5 million. On the surface this sounds right, and aligns itself with some US sentiment. According to Gallup, 34% believe that wealth is not distributed fairly, 50% believe their income tax number for this year is fair, but 57% also believe their rate is to high. Even if President Hillary Clinton failed to raise taxes and kept the current 7 tax brackets oppressing Americans today, the highest rate would round out to 40%, while keeping the most complicated tax code Americans have ever seen.

Why do lower taxes matter, is the question most Americans should ask themselves given their election choice. The break even point is the revenue point where a business makes profits after paying off costs. Lowering income taxes reduces the tax burden faced by families, allowing them to spend more money in the marketplace, thereby reducing the amount of time it takes for businesses to reach their break even point in any given month. Businesses can then use those increased revenues to pay rent, payroll, utilities and other costs more quickly. More spending also means businesses make higher overall profits, and possibly expand their workforce. 

Finally, lower taxes help offset increasing costs. In Chicago there is a proposal to raise water taxes, already after the largest property tax increase in a generation in 2016, costing the average Chicagoan an additional 13%, according to the Chicago Tribune. If 57% of Americans feel their taxes are too high, lowering them would help them reach their personal break even point quicker, leaving them more money to spend on extra items they have put off, like a new winter coat, a second pair of boots, getting on a plane to Florida versus driving their mini van to the same old camp ground, and eating at Panera bread instead of the dollar fast food menu. Americans spend more when they have more. 

Voters should ask themselves the fundamental question when they vote this fall, do I want more money in my pocket? Lowering taxes means lowering withholding, providing an immediate effect on your biweekly pay check. So if your costs are rising, why not take something back to help pay them in 2017? A skeptic would argue that yearly raises help with these costs, but with the average raise at 3% according to the Fiscal Times, it is not nearly enough.

Maneesh Sharma MS MBA, Founder FindVoters, All rights reserved.

Peter Principle and the GOP

10/2/2015

Up until today, we have been guided by the conventional notion that the GOP is being out-flanked by cantankerous and unaccomplished (politically) outsiders. We are being told that the bluster of the arch real estate mage Trump and the soft spoken pediatric superman Carson represent an existential threat to the chances of a GOP presidency.  Carly Fiorina, whose light has diminished slightly since her home run second debate performance is not far behind the two outside front runners.

Nothing could be further from the truth if you apply the Peter Principle to the current political race.   Under this notion, made famous by Laurence J Peter, competent business professionals will gradually be promoted until they eventually fail. We can see this in corporations around the world where conventional wisdom and promoting from within lead to catastrophic failures and a living within the bubble phenomenon (the jury is still out on VW’s computer scandal, but it will be interesting to see who and what knew about it and how long they were at VW). If we apply this notion, that sometimes promoting from within causes catastrophic failures, we do not have to look far to find conventional GOP failures; the standard bearers whose time had come  i.e. Bob Dole, John McCain, and Mitt Romney. The establishment is being threatened by so called outsiders, however the outsiders may be better equipped to change the political establishment, which has spent years becoming elected on failed promises to its base. Does anyone really believe an insider will create a wall or cut spending? These are the core ideas propelling the fifty percent spread by Trump and Carson.

To ask that the GOP presidential race be more civil is a fine request, but to summarily fall rank and file beneath the next Peter Principle GOP contender is a severe mistake. Marco Rubio and the outsiders look like they have a score to settle, as it looks like his time in the lime light is today. Let’s hold our judgement on what the GOP would have chosen circa 1994, 2008, and 2012 and focus on the now, 2016.

Maneesh Sharma MS MBA, Founder FindVoters, All rights reserved

 

 

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