The difference between Newt Gingrich and Mitt Romney can be summed up in a pivotal moment at the Republican debate on Monday night. When Newt Gingrich told Mitt Romney that investment income would not be subject to tax under his tax plan, Mitt Romney did not express the joy that one might expect given most of his income is derived from investments. Rather, Mitt displayed shock and disdain.
Newt calmly explained that according to Alan Greenspan, the best way to maximize economic growth is not to tax investment. By not taxing investment, Newt would create an environment for maximum job growth and restore America's economic vitality. While Mitt Romney believes his management skill will help restore economic prosperity, Newt Gingrich wants the American people to create their own prosperity.
Barack Obama wants to make the 2012 election about income inequality. Rich vs poor. Haves vs have nots. Newt Gingrich wants to level the playing field by giving everyone the option of being taxed at the lower rate the "rich" are currently being taxed at. These are the rates that all investment income is taxed at, however higher income Americans tend to derive more of their income from investments. Progressive tax codes discourage work because they tax additional income at higher rates. Where Obama wants to raise rates, Newt wants to lower them.
Later in the debate, Mitt Romney claimed that he wants to make U.S. taxes competitive with the rest of the world. Yet, noticeably absent from his economic plan is an effort to lower the U.S. corporate tax rate. One of the reasons so many manufacturing jobs go offshore is that the U.S. corporate tax rate is dramatically higher than other nations. Also, unless the profits of U.S. foreign subsidiaries are repatriated, the U.S. Treasury never receives any taxable income. This system encourages U.S. corporations to defer taxes incurred by their foreign subsidiaries indefinitely. It is no wonder that many companies develop products in the United States but manufacture them abroad.
Newt Gingrich aims to rectify this discrepancy by lowering the U.S. corporate tax rate to that of one of our chief foreign competitors, Ireland. By doing this and preventing companies from deferring their foreign profits indefinitely, Newt removes the incentive for companies to manufacture abroad. Further, Newt generates revenue for the U.S. Treasury that had existed only theoretically in the past.
Mitt Romney claims to be interested in the taxes of the American people but the only tax reduction his plan provides is a modest proposal to eliminate the capital gains tax for a class of income earners that historically has had very few capital gains. Mitt Romney even flirted with raising taxes by suggesting his support for a V.A.T during a late December interview with the Wall Street Journal editorial board.
Newt Gingrich is the only candidate that eliminates taxes on investment, makes our corporate tax rate competitive with the rest of the world so large companies will want to relocate to the world's largest market, and flattens and lowers the personal income tax rate for everyone.
Given that Mitt Romney claims to "know how jobs come and how jobs go," it is surprising that he has not offered an aggressive tax reform plan. It is difficult to envision how President Romney would encourage economic growth without one. Mitt Romney might be better off returning to Bain Capital and enjoying the 0% capital gains tax rate that President Gingrich would afford him.