Wednesday, January 09, 2008

GOP Presidential Hopefuls, Taxes & the Economy

Exit polls in New Hampshire revealed an interesting economics split between Sen. John McCain and Governor Mitt Romney.

54 percent of voters believe that reducing the budget deficit is the highest priority for the next president, while 44 percent believe in cutting taxes. Of the deficit cutters, McCain boasted a 20 percent lead over Romney, 46 to 26 percent. Of the tax cutters, Romney led McCain by 10 points, 37 to 27.

By the way, the most important issue for the country for Republican voters according to the New Hampshire exit poll was the economy at 31 percent, trailed by the war in Iraq at 24 percent. Illegal immigration came in at 23 percent with terrorism following behind at 18 percent.

But as far as the economy is concerned, McCain led Romney, 41 to 21 percent.

Although McCain voted against the Bush tax cuts in 2001 and 2003, Romney was not in favor of them either while he was Governor of Massachusetts. Noteworthy is the fact that McCain favored the Reagan tax cuts during the 1980s, while Romney indicated a lack of support for the Reagan program during his unsuccessful 1994 Senate run against Ted Kennedy.

Hard-line tax cutting strategists like Cesar Conda and Vin Weber have been working to position Romney as a supply-side tax cutter during the current campaign. And according to the New Hampshire results, this is paying off among many Republican voters.

Nevertheless, McCain’s message of cutting federal spending and eliminating budget earmarks is hitting home. More and more voters seem to be increasingly worried about excess government spending. McCain is the favorite on this issue.

McCain’s supply-side credentials have been boosted by Jack Kemp’s endorsement earlier this week, as well as the Arizonan’s campaign message that he will work to make the Bush tax cuts permanent.

Senator McCain is also arguing that if the Bush tax cuts had been accompanied by stronger spending restraint, then there would be plenty of budget room for across-the-board tax cuts today. Incidentally, the Bushies are preparing a very weak-kneed temporary tax cut plan right now that as yet, has no big bang supply-side cuts such as slashing the corporate tax rate.

Meanwhile, the McCain campaign is looking carefully at a possible corporate tax cut proposal, as well as eliminating the dividend tax altogether as a means of ending the double tax on corporate profits.

The Romney campaign is preparing its own tax cut plan expected to be delivered in Michigan on Monday. (Michigan of course is a liberal paradise with overtaxing, overspending, and over-unionizing. It boasts the first in the nation unemployment rate at 7.4 percent.) The McCain people also expect to unveil some new economic policies in Michigan which would include a strong free trade component. As one McCain insider told me, “John is the strongest free trader in the country today, but never seems to get much credit for it.”

Meanwhile, Rudy Giuliani today unveiled a strong across-the-board tax cut plan that would get rid of the death tax, reduce capital gains and dividends to 10 percent, and then index them to inflation. The former New York City mayor would drop the corporate rate from 35 to 25 percent, along with an expansion of tax-free savings accounts. He will also look at an optional tax plan with three rates of 10 percent, 15 percent, and 30 percent.

It is good to see aggressive tax cutting strategies on the Republican campaign trail. This includes the flawed, but still prominent, Fair Tax proposal from Governor Mike Huckabee.

It’s too bad that the White House is not reaching out to Charlie Rangel to slash the corporate tax rate. It could be paid for in static terms by abolishing all the corporate tax loopholes, subsidies, and various K-Street earmarks.

More to be revealed on taxes.