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During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
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The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
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Get Four
|  | OCTOBER 25, 2004
By Amey Stone Bush or Kerry? A Pocketbook Rating [Page 2 of 2] Taxes: Bush If reelected, Bush would fight in '05 to make permanent many of his past tax cuts, which are set to expire in a few years, including the 15% capital-gains rate, a 35% top tax rate, and a 15% tax on dividends. "But it will be a tough fight getting that through the Senate," says Greg Valliere, chief strategist at Charles Schwab's (SCH ) Washington Research Group. Kerry promises tax relief for the middle class, in part by raising taxes on the wealthiest Americans -- those earning more than $200,000. But if he's serious about cutting the deficit, the Democrat may need to raise taxes more than he's saying now. Again, that seems unlikely, given the potential for legislative gridlock. However, Bush seems more determined to keep taxes low, even if it means watching the deficit climb ever higher. Bush also has a goal of reforming the tax code, making it simpler and fairer, as well as rectifying current problems with the dreaded Alternative Minimum Tax (AMT), which is hitting too many moderate-income Americans. Those are worthy goals. Investments: Kerry This is a controversial point: Most investment strategists favor Bush and believe he would be better for the stock market. However, history shows that Wall Stree performs better under Democratic Administrations. Since 1901, the Dow Jones industrial average has returned an average 9.1% annually under Democrats, but only 6% under Republicans. President Clinton's record on that score is the best recent example. Plus, Wall Street is increasingly worried about the deficit and the standing of the U.S. among foreign nations. Many investment pros are starting to think a Kerry Presidency might be better for stocks in the long run (see BW Online, 10/18/04, "The Street Gets Comfortable with Kerry"). Plenty already believe that Kerry would be better for the bond market, especially municipal bonds, which would be more attractive if taxes are increased. A Bush Presidency would be better for dividend-paying stocks, and sectors like health care and energy that Kerry might regulate more aggressively. But Kerry just might have a preferable strategy for stimulating growth, and that would better boost the stock market overall. Consumer goods: Bush What about the prices of everything from Tupperware to blue jeans? Inflation has been kept in check under Bush. With energy costs rising, companies may try to raise prices. However, with wage growth so anemic, they're unlikely to be able to. Plus, Bush would likely do more to keep companies' costs low. His energy policies and looser regulation would keep their expenses down. Moreover, he wants to push tort reform, which would reduce many manufacturers' exposure to product-liability suits. Then there's competition abroad, which drives down prices at home. Both candidates have discussed some limitations on free trade, which allows cheaper products to be imported. But Kerry appears more likely to favor such moves. He has also suggested ways to discourage companies from outsourcing, which keeps the price of goods lower for consumers. All in all, companies seem less likely to raise prices under Bush. Health-care costs: Kerry Reforming U.S. health care is one of the senator's key initiatives. Achieving his most ambitious reforms in what will likely be a Republican Congress would be next to impossible. However, he would still endeavor to push through some change that would lower health-care costs for average Americans. He would try to make health insurance more available and enable Americans to import cheaper drugs from Canada. His policies could ignite a pitched battle between government and drug and health-insurance companies, but it would likely lead to a better health-care deal for more people.
 Stone is a senior writer at BusinessWeek Online and covers the markets as a Street Wise columnist Edited by Beth Belton Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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