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The Economics Of McCain Vs. Obama

With so many campaign speeches and TV ads, what is really going on with the positions of the candidates?

Let me qualify this post by saying that I am not a fan of either candidate, and as usual, the presidential election doesn’t come down to the best man for the job; but rather the lesser of the available evils.  If you read this blog, chances are you are in the real estate business, the mortgage business, or you are a consumer looking at a mortgage or buying a home.  Let’s take a look at the positions of the candidates to see where they stand on issues that affect the economy and the real estate business as a whole.

I have heard the Obama campaign accuse McCain of being out of touch, pro big business, pro oil and generally against the plight of the average american.  At the same time, the McCain camp accuses Obama of being an elitist celebrity.  My number one issue in the election is the economy and how they individually plan to address the larger issues facing us domestically.

Taxes

I watched a speech given by Barack Obama where he claimed that it is somehow the duty of the government to step in and impose a “win fall” tax against big oil companies as Americans are struggling financially at the pump and looking for relief while oil companies are making record profits.  On the surface, I thought this was genius as a campaign slogan.  I mean, what American wouldn’t want to stick it to somebody about the current state of gas prices.  But, here is the flip side of that Robin Hood logic.  A business (any business), is in business to make money for it’s shareholders.  It is not criminal to make a profit, nor is it worthy of an apology.  Oil companies are making record profits for their shareholders in the last few years, and those shareholders are….you.  They are your portfolio, your retirement fund, your mutual fund, or any number of places where you can realize a portion of the profits that the evil oil companies are making.

Picking and choosing companies that are making “too much money”, and taxing them punitively for their efforts is as un-American as anything I have ever heard from a politician, in fact, it borders on socialism.  As I was watching this speech, I couldn’t help but notice the roar from the crowd in support of this punitive taxation.  I’m not sure which is more frightening, a presidential candidate blatantly pitching socialism as a way to solve our problems, or a crowd of followers eating it up with a spoon.

I have also seen TV ads accusing McCain of offering big oil companies up to $4 Billion in incentives at a time when they are already making record profits.  i don’t know if those numbers are accurate or not.  But, what they are not telling you in those ads is that the US has one of the highest corporate tax rates in the world, and McCain is in favor of reducing the corporate tax rate from 35% to 25% to keep businesses here and help stimulate growth.  I’m sure that oil companies will benefit from this plan, but so will every business in the country.  For those of you who have seen jobs race oversees to India and China for lower wages, it is because we live in a global economy and businesses are open to make money.  If you over tax businesses, they will not have the money to grow, expand and hire new workers.  By going overseas for this, they help to offset the taxation received in the US, and it is this same taxation that has lead thousands of companies to relocate their headquarters offshore to avoid the over taxation of the current US tax code.

One item that directly affects real estate is the capital gains tax.  Obama is in favor of almost doubling the current tax from 15% to 28%.  This means that if you are a real estate investor, your profits on a house flip will be cut in half.  It also affects the sale of stock, not only in your personal portfolio, but within your mutual funds and retirement accounts.

Based on what I’ve seen, I really have a hard time understanding why a working tax payer would vote for higher taxes.  I know there are other issues in an election such as social programs and obviously the war in Iraq, but volunteering to raise taxes for the sake of “change” seems very much like shooting yourself in the foot.

I’m sure this post will rub some people the wrong way, and that is not my intent.  I just believe that the road to prosperity is through free market capitalism.  You can’t tax your way to prosperity any more than you can borrow your way out of debt.


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