That America’s growth figures are better than Europe’s is hardly something about which anyone should boast. Europe is at least being forced to confront some underlying structural problems which America has yet to address. The US federal deficit is still out of control, but spending money on credit does generate the illusion of prosperity – an illusion people are reluctant to give up if they have nothing else.

Part of the problem is that this is election year and politicians of all parties have been even more wary than usual of anything that resembles decisive action. Yet it is difficult to see how things will improve after November.

Our New Year prediction that President Obama will be re-elected comfortably is now looking more solid than ever. Whatever one thinks of him in other respects, the net effect of this for business is No Change – if a President does any good at all, he usually does it in his first term. It is fair to say that the Obama Administration to date has not been driven by sympathy for small business. Right or wrong, its healthcare reforms have added to the burden on employers. The President himself has never run a business and his lack of understanding has come out in some recent comments. First he made the bizarre suggestion that everything was fine in the private sector, and then he seemed to pour scorn on the role of entrepreneurs in the success of their own businesses.

On paper, his opponent, Mitt Romney, has the perfect curriculum vitae. He has both a law degree and an MBA from Harvard, and a brilliant track record as a corporate recovery expert – just what America needs, one might think.

However, as we have often remarked before, there is a world of difference between good on paper and good in practice. Mr Romney is failing to convince. His selection of a leading House Republican as his running mate shows a lack of understanding of the public mood, which is strongly anti-Washington. He also missed the opportunity to show that his party is more than the exclusive preserve of middle-aged white males – it is not tokenism to say that, because Condoleeza Rice, Bobby Jindal, and Marco Rubio are all better qualified than the man he picked.

The ideal President would combine Mr Obama’s undoubted communications skills and Mr Romney’s undoubted business savvy. Does such a man exist – and how likely is it he would get a major party nomination if he did – or has the job of President, both Head of State and Head of Government, become too big for one man?     

Middle-income entrepreneurs in the UK can end up handing over more than half their hard-won earnings in taxes of one sort or another. So it is indeed shocking, but not really surprising, that US Presidential Candidate Mitt Romney, who is worth an estimated $250 million, paid taxes of “only 13.9%” on the $43 million he made over the last two years.

As usual, however, the media headlines do not tell the whole truth. A more accurate figure may be 14.5% rather than the 13.9% which was widely reported because it made a better story. Most reports also ignore the fact that this figure refers only to federal taxes: Americans pay state and local taxes on top of this. Finally it should be stressed more than it has been that this effective tax rate is an average over the whole income and should not be confused with the headline marginal rates that are payable on only part of the income of higher earners – the notorious 50% in the UK.

All that said, it does still shock how the effective rate paid by Mr Romney is much lower than that paid by many who are a lot poorer. There is no serious suggestion that Mr Romney has done anything illegal or dishonest. On the contrary, it is surely to his credit that he gave about $7 million to charity, which is tax deductible in the US and therefore a major factor in the relatively low marginal rate. He should not be condemned for generosity.

Nor should he be criticised, as a man in his 60s, for being retired from active business and living off his investments. Income from investments is taxed at a lower rate, as capital gains. At first glance, it does seem absurd that the tax rate on “unearned income” is lower than that on “earned income”. Yet most “unearned income” actually comes from the investment of income previously earned, so it seems unfair to tax it twice at the full rate.

In any case, Mr Romney has only done what we all do: arrange our finances to minimise our tax liability under the existing system. It is the system that is wrong.

Governments with high marginal tax rates know that they are economic nonsense but keep them for purely political reasons: they give the impression that they are “soaking the rich”, which usually goes down well with the vast majority of the voters who do not consider themselves rich. In order to prevent the rich disappearing, and most of their countries’ economies with them, these governments have almost invariably undermined the high headline rates of tax by a complex, but discreet, system of write-offs and loopholes. These tend to be more accessible for the super-rich than for middle-earners. This is why a flat rate tax would be both fairer and more efficient.

The most significant thing about Mr Romney’s tax returns is that they run to more than 500 pages.