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At present, the US’s corporate tax, when the state tax is added, is the highest among the 34-member Organisation for Economic Co-operation and Development comprising most European countries, the US, Canada, Mexico, Australia, New Zealand, Japan and South Korea. Obama has called for the federal rate of 35 per cent to be cut to 28 per cent and to pay for it by limiting various deductions like depreciation and interest. Romney would lower it to 25 per cent but has not specified which deductions and loopholes he would eliminate. The differences are more marked on individual taxes, which provide the bulk of the total federal revenue. Obama’s proposal is to permanently extend all tax cuts given by George W. Bush except for the wealthy. He would tax the top two brackets now 33 per cent and 35 per cent, as they were until 2001, that is, 36 per cent and 39.6 per cent respectively limiting the value of deductions available, so that the minimum effective tax rate is 30 per cent. This is often referred to as the ‘Buffet Rule’, after Warren Buffet famously stated that he is taxed at a lower rate than his secretary albeit with the deductions available under capital gains and dividends. Romney has called for a 20 per cent cut on all individual income tax rates, repealing of the minimum tax under ‘Buffet Rule’, maintaining the 15 per cent rate on capital gains and dividends for the rich and eliminating this altogether for the middle class. He claims his plan would be revenue neutral by limiting tax breaks on deductions and boosting economic growth. However, evaluating this plan becomes difficult as he has not specified which tax loopholes to close and the maximum amount allowed for tax deductions. As Obama pointed out in the last debate, Romney’s 20 per cent tax cut would result in a five trillion-dollar deficit, in addition to two trillion dollars for his proposed increase in the defence budget totalling seven trillion dollars, which will be in addition to the present deficit. He commented, “The math just doesn’t add up.” The Congressional budget office, a non-partisan organization, has published studies in the past indicating that the benefits of tax reform are often exaggerated. Among the more noteworthy are that its own growth estimates were not much different from the actual ones after Ronald Reagan’s tax cut in 1981 and after Bill Clinton raised taxes in 1993. Bush’s tax cuts also did not result in as much growth as he had projected. But to the middle class, the prospect of a lower income tax is appealing and to the jobless or underemployed, the idea that Romney’s plan will result in growth and more jobs is more than welcome. Moreover they cite Romney’s record — both in private business and public office — as proof that he will succeed as president too.
“The first thing I’d do when I become President is to repeal ‘Obamacare’,” Romney declared in describing the health care bill that Obama passed last year. With the economy the most important thing on people’s minds, ‘Obamacare’, is certainly most incendiary. Americans have never opted for federally administered health care as prevalent in Europe, and Romney and all Republican candidates have castigated it at every opportunity. They also want to end Medicare, the sacred public health programme for the elderly and slash Medicaid, geared to treat the sick among the poor, claiming they would bankrupt the US. Perhaps the most contentious of all is the provision in ‘Obamacare’ by which the states that were required to cover only specific groups, such as pregnant women, under Medicaid will now have to cater to all those with incomes up to 138 per cent of the federal poverty level pegged at 23,050 dollars for a family of four. The federal government would pay for the increased expenditure in 2014, falling to 90 per cent by 2020. Those who do not qualify for Medicaid, earning up to four times the poverty level, will get tapering subsidies to buy insurance from new health exchanges run by states with private insurance companies.
Another controversy centres on the ‘individual mandate’ that ‘Obamacare’ demands — the requirement to buy insurance or pay a fine. This mandate has been included to end the free treatment that the uninsured receive at hospitals in ‘emergency situations’, the cost of which is passed on to everyone else in higher fees. It is also a tool to pass on the cost of treating the very ill. In effect, ‘Obamacare’ will extend medical facilities to 32 million Americans who were not covered. Romney, who had a similar bill passed as governor, when asked why he opposed ‘Obamacare’, said he did it for a state. The best way for expanding healthcare benefits to the poor would be for the federal government to hand over the money they now spend on a state to that state and let it make its own decisions, a solution many agree as pragmatic.
The differences between the two candidates are marked on every other major issue — how to respond to China in the trade war, education in schools, immigration and how illegal immigrants should be treated, investment in traditional and green energy and, of course, social values, and the stance on abortion. The latest poll published by the Wall Street Journal on the morning of the final debate showed the two candidates tied at 47 per cent among likely voters, and though Obama appeared to have an edge over Romney in that debate, it is difficult to ascertain if it will translate into votes. Moreover, the election is not decided on popular votes polled but on the electoral college of the states. Thus ‘swing’ states, where the races are close, are in the midst of bitter campaigning by both sides. The worrisome factor, though, is that whoever wins will face a fiscal cliff at the end of the year and an unprecedented fiscal crisis in the medium term as the population ages and reliance on the government increases.
Shortly after the final debate, I was with a motley group of Indian Americans, all of whom were of working age, and was asked who I would vote for if I had a vote. I answered that my generation would normally vote for the Democratic ticket, but the best friend India ever had was George W. Bush. So I would toss a coin.
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