She doesn’t, as far as we know, grope women she has hardly even been introduced to. She doesn’t go around gratuitously insulting whole countries or, indeed, continents. She doesn’t engage in Twitter storms in the middle of the night, or cosy up to Russian autocrats. Yet just because Hillary Clinton is clearly a better candidate than Donald Trump, simply by virtue of being a relatively normal human being, it doesn’t mean that she is going to be a great American president.
Trump’s weirdness means that Clinton’s plans have largely escaped scrutiny – her opponent anyway has no interest in detail. After the dust has settled, and as she chooses her economic team, investors will start to focus on her policies – and won’t like what they see. In fact, Hillary-nomics is eerily similar to the kind of stuff Ed Miliband was pushing at the last British election: lots of fiddly taxes, some increases in spending, and plenty of measures to bash the bankers and the rich more generally.
According to the Tax Foundation, a US-based think tank, Clinton’s plans will knock 2.6% off the US growth rate. They will cost 700,000 jobs over a decade and knock 7% off the investment rate. Clinton has proposed a new surtax on anyone with an income of more than $5m a year. She has put forward a so-called “Buffett Rule” that would ensure anyone with an income in that bracket would pay at least 30% in tax every year, drastically reducing the scope for the better off to juggle around their income to reduce bills.
And she would push through big rises in estate tax – the US version of our inheritance tax – that would push rates up as high as 65% for the wealthiest families. That is close to the levels of the post-war death duties imposed in this country that led to the breaking up of old estates and the sale of many family businesses – and would have a huge impact on the ownership of private industry.
Yet while Clinton is planning big tax rises for the better off, she has promised only a few very modest tax cuts for the poorest to compensate. The result? There will be a big overall tax rise – at least $1.4trn over a decade, according to the Tax Foundation.
It gets worse. Clinton is big on fiddly tax changes, of the kind pushed by left-leaning think tanks, that would supposedly make capitalism work better. She wants a graduated capital-gains tax that will vary according to how long you have held an investment. Yet that will sometimes result in punishing tax rates.
Clinton is pushing for business tax reforms on capital gains and investment, the overall impact of which is likely to reduce the amount of money going into new factories, warehouses and offices. That is the last thing the economy needs. Worse, rather than reforming America’s wildly uncompetitive corporate tax rate, which has already led to an exodus of companies, she had suggested an “exit tax” – an idea the East German Politburo might have come up with on a bad day.
It is largely a myth that the US is a low-tax country. That might have been true a generation ago, but it is no longer so. Tax levels are broadly similar to those in the rest of the developed world. A country once famed for its entrepreneurial spirit has no net new start-ups, far fewer than in this country.
Outside Silicon Valley, it is one of the least entrepreneurial countries in the world. In the next four years Clinton will accelerate the transition into a high-tax, high-spending, European-style social democracy. Increasingly, the US may start to look like France, but without such good cheese. The result? A sharp slowdown in US growth at precisely the time when the world needs it most.
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