Following last week’s election, the President and his allies in congress are claiming the outcome of the election (and exit polls) indicates a mandate to raise taxes on the “rich.” Why? Because the President campaigned on a higher tax message. Actually, he campaigned on raising taxes on millionaires and billionaires, not the “thousand-iares” that will see a higher tax bill if he gets his way. But the more dominant message during President Obama’s campaign was not one of higher taxes, but that he isn’t Mitt Romney. If there is any clear mandate from this election, it is not to be Mitt Romney. So congratulations Mr. President, you aren’t Mitt Romney. How that translates into policy is unclear. What is clear is that the President’s claim of a mandate on taxes is dubious.
When you cut through the rhetoric, the President’s message on taxes during the election was a choice between paying higher taxes or asking somebody else to pay higher taxes. Based on exit polls, 60% of Americans said somebody else should pay. That somebody else is the 2% of households that earn more than $250,000 per year.
The results of the exit polls are shocking. Not because the majority of Americans favor higher taxes on the top 2%, but because only 60% of Americans favor such a policy. Ponder the question for a moment. The exit polls are effectively asking 100% of Americans if they would rather see their own taxes go up, or see the taxes of the top 2% go up. The question is obviously flawed. Of course a majority of Americans would rather somebody else foot the bill for profligate government spending. And I am sure that if you asked the bottom half of the top 2% if they would rather see the taxes of the top 1% go up than their own, a majority would favor that policy too.
There is no mandate for higher taxes. The only tax mandate in this election is for somebody else to pay. Maybe we can start taxing the Chinese!
Jeremy Jones, CFA
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