We are in the final months of the hotly contested Presidential race. This historic election is different than any other that has come before it. Social media and the connected generation has driven the hyperbole to feverish levels. Throw in the wild card of showman extraordinaire and potential Republican nominee Donald Trump and it signals the most exciting and societal altering U.S. election of our lifetime.
Investors need to be prepared for whatever happens in the election. According to the rhetoric of all the candidates, significant changes no matter who wins the election are on the way.
We have already dug deep into what stock market investors can expect should Republican front-runner Donald Trump or Democratic leader Hillary Clinton takes the Whitehouse in November.
Some things have changed since these earlier articles. Trump has slipped a little and the Republican underdog; Ted Cruz has started his assault to win the party’s nomination.
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A very close contest into the week of July 18th Republican convention is the only sure thing right now.
Understanding the economic platform of all the viable Presidential candidates and what specific stocks should benefit under their leadership is the smartest move for every investor right now.
Here’s a closer look at what to expect should Ted Cruz be the next President of the United States.
Mr. Cruz is a junior senator from Texas and has a very good shot at becoming the Republican nominee for President of the United States.
Should he win the White House in November, we can look forward to several radical changes in the economy.
First, Cruz is a strong proponent of the “flat tax” system.
Under this income taxation system, he has proposed a flat 10% tax on all individual income and the abolishment of the Internal Revenue Service. In addition, corporate entities can expect a flat tax of 17%.
He explains the tax reform this way.
Under the Simple Flat Tax, the current seven rates of personal income tax will collapse into a single low rate of 10 percent. For a family of four, the first $36,000 will be tax-free.
The Child Tax Credit will remain in place, and the Simple Flat Tax Plan expands and modernizes the Earned Income Tax Credit with greater anti-fraud and pro-marriage reforms.
As a result, the Simple Flat Tax will ensure that low- and middle-income Americans have greater opportunities – not only through minimal taxes, but also through better, high-paying jobs that the Simple Flat Tax will generate. Under the plan, deductions for charitable contributions and mortgage interest payments are preserved.
The IRS will cease to exist as we know it, there will be zero targeting of individuals based on their faith or political beliefs, and there will be no way for thousands of agents to manipulate the system.
For businesses, the corporate income tax will be eliminated. It will be replaced by a simple Business Flat Tax at a single 16 percent rate. The current payroll tax system will be abolished with the maintaining full funding for Social Security and Medicare.
The convoluted tax code will be replaced with new rules of the game – so simple, in fact, that individuals and families could file their taxes on a postcard or phone app. The Death Tax will be eliminated. The Alternative Minimum Tax will be eliminated. The tax on profits earned abroad will be eliminated. And of course, the Obamacare taxes will be eliminated. Also gone will be the unending loopholes in the current code, the stacks of depreciation schedules for businesses, and the multi-tiered rates on income and investments. Under the Simple Flat Tax, the Internet remains free from taxes.
The results will be truly dramatic. According to the well-respected Tax Foundation, the Simple Flat Tax will deliver an economic boost of tremendous magnitude. In the first decade, the Simple Flat Tax will:
- Boost Gross Domestic Product by 13.9 percent above what is currently projected.
- Increase wages by 12.2 percent.
- Create 4,861,000 additional jobs.
In the tax-cutting spirit of Presidents Ronald Reagan and John F. Kennedy, the Simple Flat Tax will lift Americans out of the current economic stagnation and into a historic boom.
Should this tax reform be instituted, stock market investors can expect an economic boom across the board. Lower taxes will result in greater consumption and investment supercharging economic growth.
Cruz even proposes that taxpayers will be able to file their tax returns on a postcard like form!
This proposal will be a boon to the economy and stock market. If this plan is launched, expect the Dow Jones Industrials to rocket to 25000!
However, one sector will likely suffer greatly should it be instituted.
I am talking about the tax preparation and advice sector. The leading public company in this field, HR Block (NYSE:HRB) would eventually be hit hard since there will no longer be the need to explain and work with a complex tax code. Investors who hold this stock may want to look to close the position.
Second, Ted Cruz plans to repeal and replace Obamacare.
Ted plans to completely rehab the healthcare system put into place by President Obama. He states, “In the coming weeks, I intend to layout a plan to provide exactly that, a plan to repeal Obamacare altogether and at the same time expand options for five million-plus people, who have lost their health insurance and 300 million people across this country to expand their options to have affordable, personal, portable health care.”
He plans on accomplishing this goal via a three-part plan.
The first part is the launch of a nationwide health care marketplace.
Rather than having consumers shop in their state’s healthcare marketplace for coverage, they will have access to a national market. The increased competition is expected to lower rates for consumers.
The second part is to expand health savings accounts or HSA’s
An HSA is a tax-advantaged medical savings account for persons covered by high-deductible health plans. These plans allow consumers to save for routine health expenses in a tax advantageous way.
The reason HAS’s make sense is they allow regular individuals to have $5000.00 or even $10,000.00 health deductible policies that are very low cost overall. Anything below the deductible is paid from the savings plan, while catastrophic expenses are covered by the insurance. It allows consumers to save money while being protected at the same time from catastrophic health issues.
Lastly, Cruz wants to separate health insurance from the workplace.
This will solve an entire host of issues with jobs and medical insurance. People will no longer feel trapped to stay at their job strictly for the insurance. Next, it will increase competition since consumers will be free to choose their own plan regardless of their employment.
The stock market will benefit on multiple fronts from the elimination of Obamacare. One primary way is that the 2.3% excise tax on medical device revenue will be removed. Removing this tax will help medical device companies like Medtronics (Nasdaq:MDT) and NuVasive (Nasdaq:NUV) ramp up their revenue leading to higher stock prices.
Thirdly, Cruz supports the return of the gold standard.
The gold standard is the backing of U.S. currency with gold. While this idea is hotly debated among economists, one thing is certain, the demand for gold may increase should the U.S. return to the gold standard. This means going long ETF’s like the SPDR Gold Trust (NYSE:GLD) makes sense should Cruz be elected president.