Mitt Romney’s opinion piece in the Wall Street Journal speaks of what he would do as President: “We must reduce tax rates for job creators to promote economic growth. And we must still raise enough revenue to stop the endless borrowing that threatens American prosperity.
First, I will make an across-the-board, 20% reduction in marginal individual income tax rates. This bold stroke reduces the tax on the next dollar of income earned by all taxpayers. It also reduces tax rates for the many businesses that pay at individual rates and employ the majority of private-sector American workers, thus driving significant increases in hiring and wages.
Second, I will reduce the corporate tax rate to 25% from 35%, transition from a world-wide taxation system to a territorial one, and make the R&D tax credit permanent. These steps will unleash significant domestic investment, attract more foreign investment, and make the U.S. economy competitive with others around the globe. They will not only spur significant job creation, but also raise wages for American workers.
Third, I will promote savings and investment by maintaining the low 15% rate on capital gains, interest and qualified dividends, and eliminate the tax entirely for those with annual income below $200,000. These low tax rates will create powerful incentives for Americans to save and invest, while encouraging business investment and economic growth.
Fourth, I will take long overdue steps to correct failures in the tax code. I will abolish the death tax, whose primary effect today is to foster elaborate schemes for transferring wealth. I will also repeal the Alternative Minimum Tax, which was intended to make the code simpler and fairer but has accomplished precisely the opposite.” These policies will only further concentrate ownership of productive capital (the non-human factor of production or wealth creation) among the 1 percent, who already own America. It will perpetuate a “system” where investment is only based on savings and continue to shut out the poor and working and middle class people who are struggling to meet living needs. No where does Romney advocate a reform of the “system” to support investment incentives that stimulate economic growth while at the same time empowering the 99 percent to acquire ownership of productive capital and pay for their acquisition out of the future earnings of the capital investments.
While tax and investment stimulus incentives are excellent tools to strengthen economic growth, without the requirement that productive capital ownership is broadened simultaneously, the result will continue to further concentrate productive capital ownership among those who already own, and further create dependency on redistribution policies and programs to sustain purchasing power on the part of the 99 percent of the population who are dependent on their labor worker earnings or welfare to sustain their livelihood. By stimulating economic growth tied to broadened productive capital ownership the benefits are two-fold: one is that over time the 99 percenters will be enabled to acquire productive capital assets that are paid for out of the future earnings of the investments and gain greater access to job opportunities that a growth economy generates.
Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The basis for the commitment of loan guarantees is the fact that nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time––5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.
Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.
As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.
