Austrian School Publications Presents...

Are you interested in Austrian investing? Then this is where you need to be.

Austrian School Publications newsletters and special reports cover the global financial markets for individual investors from the ​laissez-faire perspective of the Austrian School of Economics. Sign up now for our free weekly email and subscribe to our full monthly newsletter for the most balanced and comprehensive coverage from the Austrian perspective.

July 11, 2016 ​-- Part one of a two-part series. By noted Austrian Christopher P. Casey, CFA ®, managing director at WindRock Wealth Management, in Naperville, IL, USA.

Economic intervention by government derives from monetary, regulatory and fiscal (taxation and spending) policies. While all three possess great potential for mischief and misery in bulk, fiscal policy stands alone as a subject in political races. Taxation, in particular, evokes strong emotional responses from voters who instinctively chant “soak the rich” or plead for tax relief.

History, however, does not support knee jerk reactions about presidential tax policies. The labels of Republican and Democrat bear little correlation with increases or decreases in tax rates and code complexity: for every Reagan there is a Kennedy, and for every Bush (pick either) there is a Roosevelt. Presidents, not parties, ultimately guide tax policy.

By what criteria should tax policies be judged? Overall magnitude, simplicity and fairness should be the bright lines. With this in mind, and while unrealistically ignoring any difficulties in passing tax legislation through Congress, what would a sober assessment of Republican Donald Trump, Democrat Hillary Clinton, and Libertarian Gary Johnson tax platforms conclude?

Unsurprisingly, due to his business background, Trump’s platform pushes for dramatically lower tax rates for both individuals and businesses across the board. Ordinary individual (head of household) income tax rates would be capped at 25 percent (from the current 39.6 percent) with other tax brackets equaling 0 percent, 10 percent and 20 percent.

These brackets would also be expanded substantially:

  • Those earning up to $37,500 would pay no income tax;
  • Individuals earning up to $75,000 would pay 10 percent (the current bracket ends at only $13,250); and
  • Anyone earning less than $225,000 would pay no more than 20 percent in ordinary income tax.


Businesses would likewise enjoy massive tax reductions as rates would drop from 35 percent to 15 percent. Equally impressive, the magnitude of tax rate reduction would be matched by tax code simplification. For individuals, numerous exemptions and complexities (e.g., life insurance interest, Alternative Minimum Tax, etc.) would be eliminated while the number of tax brackets would drop from seven to four.

Also, the estate tax and all of its required filings would be eliminated.

Not all of Trump’s proposals are positive since, presumably in a misguided attempt at “fairness,” pass-through businesses (e.g., S corporations and partnerships) would be taxed at 15 percent (which may be beneficial in certain situations but does introduce double taxation when dividends/distributions are made), and carried interest taxes for individuals would be at ordinary income tax rates instead of at capital gains tax rates.

Overall, however, Trump’s tax plan would be a significant boon to the economy as a whole and to every household individually.

Clinton’s tax platform, though, proposes significant tax rate increases and voluminous additions to the tax code. To wit:

  • A new individual tax bracket of 43.6 percent would be added for those earning $5.0 million and above;
  • Long-term capital gains tax rates would increase to between 27.8 percent and 47.4 percent;
  • The estate tax rate would revert to 2009’s 45 percent (from 40 percent) with the exemption lowered to $3.5 million (from today’s $5.45 million); and
  • Tax-free or tax-deferred retirement accounts would be limited in total value.

Given the current state of U.S. government insolvency, many may object that the Clinton tax plan would raise revenue and lower debt levels. However, the static models utilized to project tax revenue additions from tax rate increases fail to account for the lower economic activity (the ultimate source of tax revenue) attributable to these same taxes.

And even if the Clinton plan did increase tax revenues, history has demonstrated that increased tax revenues possess little correlation with decreased debt, but significant correlation with increased spending. While Americans may have been spared from “Feeling the Bern,” they may end up burned nonetheless.

The Johnson tax platform deserves a separate column, for it is not one of magnitude, but rather of nature, and thus requires additional discussion in next month’s column.

However, platforms, like promises, are frequently broken, ignored or rendered unfeasible in the world of politics, so while the contrast between each candidates’ tax proposals may appear dramatic, the ultimate tax profile of American households and businesses may change very little in the years ahead.

Look for part two from Mr. Casey in an upcoming post. He can be reached via email at chris.casey@windrockwealth.com. ♦

You Need Bigger Returns
Than You Think, Pro Says

​Geoffrey Fiszel, vice president, senior financial advisor and portfolio manager with Fiszel Carroll Group, in Glastonbury, CT, USA, recently shared his sophisticated formula for cutting through so much of the Wall Street sales hypes and other investment industry fog to get to the heart of the matter of just how much in the way of an investment return the average investor may need.

Using Power of Attorney 
To Protect Your Investments

​The Financial Industry Regulatory Authority recently issued a number of tips to help individual investors understand, create and prudently use a power of attorney to protect their investment account assets.

A Failed Method of Portfolio Construction Biggest Threat

The greatest risks to wealth creation and preservation for individuals lie not with a particular investment product, asset class, market or economy, but with the methods applied to the wealth creation and preservation process.

Beware the Failed Methods
Of the Investment Industry

​In a recent email exchange with the Austrian Investment Report, noted Austrian Scott Barlow, managing director at Sovren, a financial planning and investing group in New South Wales, Australia, warned of the failed methods of the investment industry.

Investors Should Look for
Cover, Not Growth: Stockman 

Speaking to Fox Business recently on current economic conditions and the performance of the stock market in the United States, Austrian in finance David Stockman, noted contrarian and former director of the Office of Management and Budget under President Ronald Reagan, warned investors that the party is over and it’s time to take cover.

Schiff Details How He Navigates
In a ‘Mixed’ Market Environment

​Noted Austrian Peter Schiff recently shared some of his strategic thinking on how best to go about earning and preserving wealth in a less-than-free economic environment.

Other Great Features

Not Everyone Thinks DOL
Fiduciary Standard is Bad

​Former hedge fund portfolio manager Luke Neely, owner of Investor Vantage and a value investor who is sympathetic to the Austrian School, said the recent Department of Labor's fiduciary rule is great news for investors who have advisors not looking out for their best interests.

DOL Imposing ‘Fiduciary’
Standard on Advisers

​The Obama administration’s Department of Labor is finalizing a new rule that will require retirement investment advisers to meet a “fiduciary” standard. Austrians in finance weigh in.

Sign Up for Our Free
​Weekly Email

Investors Should Focus
​On ‘Triple-Net’ Returns

Too many individual investors focus on nominal returns. Instead, investors should concern themselves with ‘triple-net returns’ – returns after taxes, inflation and investment expenses.

Check Out Our Blog​

Story of the Week
Auditing the Presidential Candidates’ Tax Proposals

Austrian School Publications Newsletters

Fed Watch: Where’s the
​Inflation? Why, It's Right Here

Critics of the U.S. Federal Reserve and its quantitative easing programs have long warned of significant price inflation, perhaps even hyperinflation, and other market malfunctions as a result of the U.S. central bank’s sustained meddling in the economy.

Why Every Investor Should 
Consider ‘Austrian’ Investing

​Individual investors unfamiliar with the Austrian School of Economics or Austrian business cycle theory may ask “What is ‘Austrian’ investing?” or “Why should I become an ‘Austrian’ investor?” Read on...

What the IRS Wants You to
​Know About Children With Investment Income.

​The Internal Revenue Service issued a reminder that special tax rules may apply to some children who receive investment income.

DOL ‘Fiduciary’ Standard on Advisers ​Will be Costly, Cumbersome for Investors

The U.S. Department of Labor rule that will require retirement investment advisers to meet a “fiduciary” standard is not going to make retirement planning any easier, cheaper or safer, according to Austrians in finance that we spoke with.