The Uncertainty Myth Redux

Romney and Ryan's inartistic ambiguity on their tax plan over the weekend, is my reason to repeat this July 6 post.

Republicans have long shouted from the roof tops that businesses have failed to increase their workforces because the President has created uncertainty with with his legislation, proposals and regulations.  Fortunately, most Democrats do not live on roof tops.  We are more grounded in the truth.

Today I will only focus on the respective tax proposals.   Obama was clear that he wanted to increase the top bracket for income in excess of $250,000 from 35% to 39.6%.  This is hardly a job killer.  Large corporations will not stop hiring because the tax rate for some executives will increase.  Small businesses taxed on the individual rate, that are making net profit in excess of 250,000, are unlikely to pass up a good business opportunity because of 4.6% increase in taxes over that amount.  At most it might be a slight consideration on the margins.

In contrast if business leaders believe the Ryan/Romney budget has a chance of passage there would be total paralysis.  The plan cuts taxes, primarily on upper bracket tax payers, by 5 trillion over the next 10 years.  Defense spending is to increase by 2 trillion.  But not only is the budget supposed to cover this loss of revenue, but the deficit is to be reduced.  This is to be achieved by cutting spending,  a thread bare safety net, and removing unspecified deductions.  Spending creates demand.  Businesses will be reluctant to expand until the impact can be quantified.

A central tenet of business planning is to maximize deductions.  Moreover, some deductions are industry specific.  Without knowing whose ox will be gored, businesses will be on an economic diet, leading to an anorexic economy.