Why Romney’s Tax Rate Is Great For The Economy
- Posted by TheArmoTrader
- on September 21st, 2012
Mitt Romney just released his tax records/disclosures on his site. According to records, his effective tax rate was ~14%. Like I said in my post last week, talking about his taxes diverts attention away from what truly needs to be discussed (which is the tax rates on the bottom 95%).
However, I’m here to make the argument that having Romney’s tax rate at 14% is good for the economy. But I’m not going to make the traditional ‘supply-side’ conservative argument that lower taxes will lead to higher jobs and more investment. If you want to read that, I’m sure there are a ton of articles out there.
So, how could Romney’s tax rate of 14% be great for the economy? Well, this goes back to the basics of the monetary system in which we live in. Given that our government does not need taxes to fund itself, any tax money sent to the government is just a waste. And I’m not talking about the traditional conservative “Government spending is waste” argument. I’m talking about how it’d be better if that money stayed in the private sector, where it would be utilized instead of “burned” (thus would lead to higher net private sector savings, which is needed).
According to records, Romney donated about $4 million to charity in 2011. Had he not done that, those dollars would have not stayed in the private sector, which is a negative. When he donates to charity, the money goes towards research, care, housing, etc –stuff that increases our standard of living. Now obviously $4 million in a $15-$16 Trillion economy is nothing. But when everyone does it on a Macro level, especially the higher end of income earners (Top 5%), it adds up. In fact, Americans gave $347 billion to charity in 2011 (I’m assuming most of that was used for write-offs, thus keeping that money in the private sector). Again, were not talking about a major stimulus bump here, but that is about 2% of GDP, which is better than nothing.
So this goes back to a point I stressed in my tax post, we need to structure taxes so that is shapes behavior (in a positive way), not so that it raises the most revenue. So again, stop worrying about Romney’s tax rate –anyway, its good for the economy.
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Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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