The presidential race remains a dead heat according to the polls. Consumer confidence in the U.S. held close to a seven-month low in early September as Americans’ view of the buying climate fell to the lowest level of the year. The Conference Board’s consumer confidence measure has accurately signaled the results of re-election bids for the last seven presidents, starting with Nixon’s 1972 campaign. Historically, the incumbent president has won in years when the monthly confidence number averages above 95; so far in 2012, the indicator is averaging 66.
How consumers register their sentiment via the ballot box also could depend on President Obama’s progress in reducing unemployment, which stands at 8.1 percent, compared to 7.8 percent when he took office in January 2009. The unemployment rate was 5.2 percent in the month before Clinton’s re-election, compared with a 6.2 percent average during the last 45 years. Unemployment reached 9 percent in 1975, the year before Ford lost re-election. It reached a 45-year peak of 10.8 percent in 1982 during Reagan’s first term; he was re-elected to his second term in 1984 when the rate settled at 7.5 percent.
Taxes are another issue at the forefront as the Bush tax cuts are set to expire at the end of this year. Obama would let the Bush tax cuts expire only for those taxpayers with adjusted gross income greater than $250,000 – or $200,000 if single – while Mitt Romney would not allow any of the cuts to expire. If they expire, the top ordinary income rate is slated to return to 39.6 percent on Jan. 1. In addition, qualified dividends will again be taxed at ordinary rates, as opposed to the current 15 percent rate. Also, beginning in 2013, unless it is repealed prior to the effective date, there would be a 3.8 percent tax on all unearned income of taxpayers with AGI in excess of $250,000 for the Medicare tax. Here’s a look at how the candidates differ on other tax issues:
Long-term capital gains rate
- Obama: Return to 20 percent for married-filing-jointly taxpayers with AGI greater than $250,000; 15 percent for everyone else.
- Romney: 0 percent for taxpayers with AGI less than $200,000; 15 percent for everyone else.
Top qualified dividends rate
- Obama: Return to 39.6 percent for married-filing-jointly taxpayers with AGI greater than $250,000; 15 percent for everyone else.
- Romney: 0 percent for taxpayers with AGI less than $200,000; 15 percent for everyone else.
Rate of interest
- Obama: Ordinary income rates.
- Romney: 0 percent for taxpayers with AGI less than $200,000; ordinary income rates for everyone else.
Alternative minimum tax
- Obama: Replace with the Buffett Rule, which would apply a minimum tax rate of 30 percent on individuals making more than $1 million per year.
- Romney: Repeal.
Estate tax
- Obama: Return to 2009 parameters: a $3.5 million exemption and 45 percent tax rate.
- Romney: Eliminate.
I’m not endorsing one candidate over the other, rather attempting to analyze the data and how potential policies could impact investments and wealth.
—Gus Krafve, vice president and portfolio manager, Trust Company of the Ozarks[[In-content Ad]]
