Economics

Romney and the investor class

Larry Kudlow makes a killer observation here:

A recent survey by Raghavan Mayur for the highly regarded Investor’s Business Daily shows Obama losing his lead as the economy again stalls. A month ago the president led Romney by eight points. Now his lead is down to three. Among independents, after being down three points a month ago, Romney has opened up a 46 to 37 lead.

But Mitt Romney needs to look carefully at an important subhead: Among investors who are registered to vote — about 60 percent of likely voters come November — the pro-business, market-friendly, fiscally conservative Romney has a mere 47-44 lead over Obama. A mere three points.

Successful Republican politicians, like George W. Bush in 2004, generally carry the investor class by 10 or 12 percentage points. A three-point lead is not enough.

Paradoxically, although 65 percent of investors polled by IBD think investment income should be taxed at a lower rate than wages, 63 percent favor the Buffett rule, which puts a 30 percent minimum tax on millionaires. Of course, like everybody else, investors are worried about the stagnant economy, the huge budget deficit, Obamacare, and taxes. But Mitt Romney is going to have to do better with this group if he’s to win in November.

And keep in mind, the stock market has doubled under President Obama. Is that why the investor-class vote is up for grabs?

So while Mr. Romney is out there campaigning on free-enterprise principles to grow the economy, he might pay some attention to specific investor-related issues. In particular, he should pledge to keep the same low 15 percent tax rates on capital gains (which Obama wants to double) and dividends (which Obama wants to triple). Also, tax rates on estates and inheritances will go up if Obama is reelected. Romney might want to mention that, too.

I am not sure what to make of Romney not doing better among investors. Maybe it is, as Larry suggests, a matter of emphasis. Or maybe it’s because the market, at least as measured by the S&P 500, has doubled since its 2009 lows.

While we are on the topic, here is a bit from the letter 19 CEOs have sent to the POTUS on investment taxes with a few stats Romney might want to mention:

A recent study compared the tax rates on dividends and capital gains in the United States to those in other developed nations. The top U.S. integrated tax rate on dividends (which takes into account state and local taxes), according to the Ernst & Young study for the Alliance for Savings and Investment, “will rise to 68.6 percent in 2013, significantly higher than in all other OECD (Organisation for Economic Co-operation and Development)and BRIC (Brazil, Russia, India and China) countries.”

 The top U.S. integrated tax rate on capital gains would reach 56.7 percent — the second highest among countries measured. In the global competition for capital investment, these punishingly high combined U.S. tax rates on dividends and capital gains, when combined with high U.S. corporate tax rates, could put U.S. companies at a competitive disadvantage.

We fail to see the administration’s rationale for making such a major change in its tax policies.

If America is to remain competitive in the global marketplace, we must build a tax code that encourages investment to spur economic growth and help create new jobs. We urge the administration to reconsider and support retaining the current 15 percent tax rate on dividends and capital gains. If we don’t, it could spark a new wave of volatility in our financial markets and give a competitive edge to overseas corporations at a time when we need capital formation here in America to create jobs and expand our economy.

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