Friday, September 28, 2012

Mitt's Tax Cut Mulligan

For some unknown reason, Mitt Romney dialed back his tax-cut plan yesterday, the same day new reports showed incomes are dropping.

Last month, median household income fell by about $500, and since Obama became president, income is down over $4,500. But under Mitt Romney’s 20 percent tax-cut plan, if he truly believes it and follows through with it, a married couple making $70,000 a year would save over $2,000. And take-home pay for a middle-class married couple earning about $140,000 -- with their tax rate dropping to 20 percent from 25 percent -- would increase by over $7,100. Obama has no such middle-class tax cuts.

So why would Governor Romney tell an Ohio crowd on Wednesday that they shouldn’t “be expecting a huge cut in taxes, ’cause I’m also going to lower deductions and exemptions.”

What is that all about? What kind of message is he sending? Is it pro-growth take-home pay? Or is he pulling back and hedging his bet?

I wrote in my last column about the potential benefits of the Romney plan. And I suggested that Romney should give specific examples of higher take-home pay from his tax cuts. And then I suggested that he draw a red line for middle-income taxpayers, and say “you will not lose you’re your deductions.” In other words, send a true growth message. And make it clear, not muddied.

This afternoon, one of the most senior people in the Romney-Ryan camp called me to say that Mitt misspoke, and that I should give him a mulligan. This person told me there’s no pull-back on the pro-growth tax-cut message, no new overemphasis on debt, and no departure from the Reagan-Kemp tradition.

Okay, even though I’m a tennis player, I’m willing to give Mr. Romney a mulligan. But I’ll say this: The growth message has to be crystal clear for the debate next Wednesday night. Mitt is slipping in the polls. People are confused about his message. He must clarify it.

Lower marginal tax rates. Higher middle-class take-home pay to offset lost income under Obama. More family financial resources. More growth and more jobs.

This doesn’t have to be so hard.

Thursday, September 27, 2012

Just How Fragile is the U.S. Economy?

As if the looming "fiscal cliff" isn’t frightening enough, new results suggest it’s already doing very serious damage to the economy. And it’s only September.

According to a new survey released by the Business Roundtable, corporate America’s view of the economy is as bleak now as it was in 2009, when the economy was struggling to emerge from recession.

Also, the survey shows executives are now more likely to cut jobs over the next six months, and that companies are less likely to raise their capital spending.

Largely the CEOs who participated in the study cited the "fiscal cliff," or the confluence of tax hikes and spending cuts that could go into effect as soon as January 2013, as a major influence behind their decisions.

Dow Chemical CEO Andrew Liveris called the fiscal cliff a 'multiplier' that makes any negative catalyst that much worse.

As much as $500 billion in federal spending reductions and expiring tax cuts are due to take effect if Congress and the White House are unable to find a compromise on these issues by Dec. 31, 2012.
As a result, the CEOs also lowered their forecasts for U.S. economic growth.

“The government is failing us as a whole,” charged Liveris on The Kudlow Report. “This is self-inflicted uncertainty.”

They now expect real gross domestic product to rise 1.9 percent in 2012, down from a June forecast of 2.1 percent growth.

In turn, these concerns have already begun to ripple across the economy, and may in part explain the spate of lowered earnings forecasts from companies such as FedEx and Norfolk Southern.

The findings come less than two months ahead of the U.S. presidential election, in which the weak economy and stubbornly high unemployment are shaping up to be key elements in voters' choice between incumbent Democratic President Barack Obama and Republican challenger Mitt Romney.

The Romney campaign was quick to call out the results as a sign that Obama's economic policies were not working.

"Business leaders have the gloomiest outlook in three years and the President's failed economic policies of higher taxes and more regulations will only make things worse," spokesman Ryan Williams said in a statement.

The Obama campaign did not immediately respond to a request for comment.

“Whatever president and congress we get in November, it doesn’t matter. What matters is that we get one that gives us solutions,” said Liveris.

CEOs who participate in the Business Roundtable collectively generate $7.3 trillion in annual revenue and employ some 16 million people.

Monday, September 24, 2012


It is the first clause in the newly published verbatim rant of Chief Whip the Rt Hon Andrew Mitchell MP which I find the most offensive. To a police officer doing their job and following the security rules they had been told to follow – ‘Best you learn your f------ place’. Oh dear.

The real damage of this whole episode is, of course, the class one. We rule, you are ruled, oozes from every word. And not because we are elected, just because of who we are. Few things could be more damaging to the present Government.

Of course, Mr Mitchell (as he likes to be addressed) is correct that the police ‘don’t run the f------- Government’, and we would all fight (I hope) to keep it so, even avowed pacifists like me. But, appointed by us and given rules on security to keep our elected members safe, the police officer at that barrier did have the right to tell him which gate he was allowed to use. However annoying those petty rules may be, politicians of all people should follow them. If they want the rules changed then they have the power to make that happen.

And as for ‘you’re all f------- plebs’, that is a word that will haunt Mr Mitchell as long as he is in politics. Because it fits precisely the tone of the rant. In Rome ‘plebeians’ meant the mass of the people as opposed to the patrician class who ruled them. Back to ‘learn your place’. Sorry, ‘learn your fucking place’. I don’t wish to misquote the Rt Hon Andrew Mitchell MP.

Before the apparently full account by the officer was published in The Daily Telegraph dated 25 September, Mr Mitchell said "I am very clear about what I said and what I didn't say and I want to make it absolutely clear that I did not use the words that have been attributed to me." He also apologised again.

The Daily Telegraph account


As it gets colder million of us worry about heating bills for the coming winter. But governments and the energy companies have money to get rid of to help us save energy. Some of these schemes offer free insulation for every householder regardless of their income or circumstances.

You should apply soon - some schemes close at the end of September. The deals may not be repeated next year.

One quick way to find out what you can get is to call the Energy Saving Trust on 0300 123 1234. It will tell you what help is available locally as well as details of the schemes for everyone run by energy companies as well as the schemes in England, Scotland, Wales and Northern Ireland run by national governments and assemblies. The service is free and impartial. More at

Energy companies
In Great Britain the big six energy companies all have schemes that provide insulation free. They normally cover loft and cavity wall insulation in suitable homes. The average saving on fuel bills is reckoned to be £175 a year for loft insulation and £135 a year for cavity wall insulation. These are standard industry average figures and your own experience may be different.

British Gas, EDF, Scottish Power, and SSE will insulate any home in Great Britain free - you don't have to be a customer of theirs and there are no conditions about your circumstances or income. Of course, your home has to be suitable - not all are. If you already have loft insulation that may not be a barrier to getting it upgraded to modern standards. The current standard is 370mm about 11 inches but the joists in the loft will be smaller often six inches. So storing things on the joists may be difficult in future.

Low income customers may also get up to £300 as a bonus - amounts differ and the cash will be paid in vouchers to spend in High Street shops. British Gas will also pay for any scaffolding if that is needed and give elderly customers up to £150 to pay someone to clear the loft.

Remember these four schemes are for everyone NOT just customers of these firms and regardless of income or personal circumstances. They are running out of time so call today.

British Gas 0800 980 8177
EDF 0800 096 9000
Scottish Power 0845 601 7836
SSE 0800 072 7201

You may find cheaper numbers by using

E.On has a similar scheme but just for its own customers.
nPower will only insulate the homes of its own customers who have a low income and also get certain benefits related to age, children, or disability.

Smaller energy suppliers and those in Northern Ireland may not have similar schemes. But it is worth asking.

The big power companies offer the deals because they have a legal obligation to achieve reductions in the amount of energy we use - it is called the Carbon Emission Reduction Target (CERT). They have to meet these targets by the end of 2012. They are all trying to do as much as they can to hit them in time.

These deals may never be repeated as CERT has ended and arrangements are different next year.

Government schemes
Warm Front (England) 0800 316 2805
NEST (Wales) 0808 808 2244
Energy Assistance (Scotland) 0800 512 012
Warm Homes (Northern Ireland) 0800 988 0559

All four offer help with insulation and with heating systems – such as boilers or inefficient fires – but to qualify you must be on a low income, normally you have to be claiming a means-tested benefit as well as being over pension age OR have young children OR be disabled.

Call to find out more. If you are calling from a mobile you may find cheaper numbers on

Other schemes
As well as the major energy companies Tesco is offering a free-to-all insulation scheme. 0800 321 3456

Many local councils are also offering energy advice and insulation schemes. The Energy Saving Trust on 0300 123 1234 can give you more information about those in your area.

Beware of anyone who cold calls you at the door offering free insulation or energy saving work. Never trust them. Always say you will call whoever they claim to represent and look the number up yourself in the phone book or on the internet or check with the Energy Saving Trust.

People in mobile homes, tenants, and those in older properties may find they cannot get help. But the Energy Saving Trust can let you know what is available.

Qualifying conditions may change. There may be application deadlines and claims after the deadline may be refused. Some end on 30 September 2012. Apply as soon as you can.

Wednesday, September 19, 2012


Householders who get the new means-tested benefit called Universal Credit could keep just 19p of every pound extra they earn – an effective tax rate of 81%. In some parts of England it could be more - losing 83p in every pound that is earned, leaving them with 17p for every extra pound they earn. Those losses are similar to many under the present system and could undermine the work incentives which the new system is designed to create. 

Universal credit
Universal Credit will be rolled out from October 2013 to replace six means-tested benefits and tax credits. It will be paid to people on low incomes who cannot work, are looking for work, or work on very low pay.

It is supposed to let people keep more of what they earn and thus boost incentives both to return to work and to earn more once in work. For every £1 extra earned the credit will be reduced by 65p allowing the claimant to keep 35p. This so called ‘withdrawal rate’ of 65p in the pound is said to be much lower than rates under the present system and allowing them to keep 35p of what they earn is seen as an incentive to work. The Government says that is a big improvement on the current system where a combination of different rules and tapers can lead to individuals losing more than more than 90p in the pound if they pay tax and their means-tested benefits are cut. 

However, that figure of 65p withdrawal rate is only accurate for people who earn less than £146 a week and are not householders.

Universal Credit is worked out after tax and National Insurance have been deducted. In 2012/13 anyone earning more than £146 a week will pay National Insurance and once they earn £177 a week income tax begins. Someone paying National Insurance will lose 12p in the pound before their Universal Credit is worked out. The total loss from NI and reduction in Universal Credit is 69p from each £1 they earn. So they keep 31p. If they pay income tax as well they lose just over 76p of each pound and keep just under 24p. Those figures were confirmed by Pensions Minister Steve Webb in Parliament just last week. (Hansard, House of Commons, 11 September 2012, col.196).

But that is only part of the picture.

Universal Credit, despite its name, does not replace all means-tested benefits. It does not include the means-tested reduction in council tax called Council Tax Benefit. From April 2013 that benefit will be replaced by a very similar scheme  called Council Tax Support which will be operated by local councils. Like all means-tested benefits Council Tax Support will be withdrawn as income rises. The standard taper is 20p for each £1 rise in net income (after tax, NI and Universal Credit). In other words for each extra pound of net income help with council tax is reduced by 20p. The result is that for each £1 earned a total of 81p disappears in tax, NI, reduced Universal Credit, and reduced Council Tax Support. The calculation is at the foot of this blogpost.

In some areas of England and Wales the reduction in income earned may be even higher. As part of the transfer to local councils the Government will cut the money it currently pays to support help with council tax. From April 2013 councils will get 90% of the money they currently get to pay Council Tax Benefit. The Government has already said that out of that reduced budget they will have to pay exactly the same benefit to anyone over pension age. Nearly half of all Council Tax Benefit recipients are pensioners so the other half – working age people who can claim Universal Credit – will bear the whole of the funding cut. That will mean a reduction for them of between 19% and 33% according to the Institute for Fiscal Studies ( chapter 5). 

Councils are currently consulting on the changes they will make in the scheme to save money. Most of the plans are still unpublished. Of those that are published most are keeping the taper at 20%. But six so far have decided to save money by increasing the taper from 20%. Four do not say how much – though the minimum rise worth implementing is likely to be 25%. One, Milton Keynes, is looking at a figure between 20% and 30%. And Trafford in Manchester is proposing to raise the taper to 30%. Only one, Brentwood in Essex, is proposing to cut the taper to 15%. (See Localising Council Tax Support by Peter Kenway, New Policy Institute

In areas which raise the Council Tax Support taper to 25% householders on Universal Credit who pay tax will find that 82p of each pound earned disappears in deductions. In areas with a 30% taper they will lose  83p and keep just 17p for each pound earned. The rest will go in income tax, National Insurance, reduced Universal Credit and reduced Council Tax Support.

Losing more than 80% of each extra pound you earn is hardly an incentive to work or to work harder.

You can read the 11 September parliamentary debate on Universal Credit here


Net after tax£0.68
UC reduction65%-£0.44
Net after UC£0.24
CTS reduction20%-£0.05
Effective 'tax'81%
An earlier version of this blog post contained an error in the calculation. My apologies.