Since You Asked.........

This week, President-elect Obama asked critics of his $1.2 trillion economic recovery plan to propose an alternative. Well, since you asked, here is mine.

Cut the corporate income tax to 10%. That would only “cost” $150 billion and would work better and faster.

Mr. Obama’s plan would create or save 3 million jobs for $1.2 trillion - $400,000 per job. 600,000 of those jobs are going to be government jobs, where we will have to pay salaries, benefits, and pensions into perpetuity.

Cutting the corporate tax rate would create the same 2.4 million private sector jobs for 1/10 the “cost” to the taxpayer with no perpetual liability for a new legion of make-work government jobs.

There is actually no “cost” as history shows that every time tax rates are cut, the total amount of revenues increase. Businesses use the money not taken in taxes to invest in growth and jobs. Those new jobs pay taxes and even though a smaller slice of the pie is taken by the government, the pie is much bigger, so everybody has more.

The U.S. has the highest corporate taxes in the world at 35%. Ireland has the lowest at 11%. We need look no further to understand why jobs are leaving this country at an alarming rate, while Ireland enjoys the highest rates of job creation and personal income growth in the developed world.

Isn’t that the objective – create jobs and increase income? Then why not do what works, instead of what doesn’t. We should be like Ireland, not like France. The European Union countries have over-regulated their way into higher unemployment, and lower per capita income than us – why are we trying to copy them?

While we are at it, let’s eliminate the capital gains tax. Candidate Obama promised to raise the capital gains tax rate by 30%. To receive the same return on an investment under the new higher tax rates, you would have to pay 10% less for any stock you would purchase. Conversely, if you were thinking of selling stock, you would make the same net profit by selling this year , before the new tax rates took effect, at a 10% lower price.

I made a friendly wager that if Mr. Obama won the election, the market would drop 10% in 30 days - it dropped 11% in 3 weeks. This was a rational consequence of the economic policy that the democrats ran on and won in this election - there was a change that the market obviously believed in.

Fortunately, math and cars not manufactured in Michigan dependably work in reverse. Just like increasing the capital gains tax rate causes the price of stocks to go down, cutting the rate makes them go up - this is not a theory, it has happened every single time, the rate has been cut.

So cut the capital gains rate and stock prices will soar – everyone's 401(k) will be back in the chips and the balance sheets of businesses, banks, and pension funds will be strong again. Besides, capital gains is triple taxation - we took a bite of the income we earned to have money to invest, we taxed dividends that stocks paid while we owned them, and then we tax a third time when we sell the stock. Many countries have no capital gains tax, and we should follow suit.

So there is your alternative, Mr. Obama. My plan would create more jobs, raise incomes higher, and restore the value of our 401(k), and it would cost a fraction of the $1.2 trillion you want to spend to accomplish far less. We would see immediate results, not have to wait "years and years" - your words, not mine.

There is a price, however. Government does not get to expand, and government does not get to take more of our money. Sorry, government, you don’t get to add 600,000 new jobs, and you don’t get to decide who wins and who loses as the economy transitions - we will do that for ourselves.

So there's your better plan - and thanks for asking.