Six Facts About Mitt Romney’s Tax Returns
After weeks of refusals and equivocation, Mitt Romney finally released his tax returns last night to a handful of media outlets, showing that he made $21.7 million in 2010 and $20.9 million last year. He only actually released one year of returns, 2010, and his estimated return for 2011, even though many have called on him to follow the precedent set by his father and release many more years of returns.
Nonetheless, there is much to learn from the astonishing 550 pages of returns Romney released:
1. Romney paid a lower tax rate than many middle-class Americans: Romney’s returns reveal that he paid an effective tax rate of 13.9 percent, lower even than the low rate of 15 percent he estimated he paid last week. While this is far less than what many middle-class Americans pay, it’s also well below what wealthy people pay. The average effective tax rate for someone in Romney’s income bracket is 25 percent.
2. Romney makes more in a day than the average American makes in a year, and becomes a 1 percenter every week: As Bloomberg News notes, “In 2008, according to the IRS, the median adjusted gross income was $33,048, which Romney made in less than a day. Reaching the top 1 percent of taxpayers required $380,354 in adjusted gross income, about Romney’s earnings in a week.”
3. Romney paid almost nothing in payroll taxes: Romney contributed just .1 percent of his income to Social Security and Medicare in 2010 via the payroll tax because the tax is only assessed on earned wages, but all of Romney’s income came from investments. Most working Americans pay 7.65 percent.
4. Romney has accounts in countries notorious for tax dodging: By now, it’s well known by now that Romney invests in funds based in the Cayman Islands, but Romney’s returns were “crammed with information about foreign holdings” and reveal that he held accounts in Switzerland and Luxembourg, countries famous for hiding money thanks their low taxes and strict banking secrecy laws. Aides said he closed his Swiss account in 2010 because it might have been “politically embarrassing.”
5. Romney and Gingrich’s tax plans would slash Romney’s taxes: Romney already pays less than many middle class Americans, but under his proposed tax plan, his rates would be slashed in half. Meanwhile, under challenger Newt Gingrich’s plan, Romney would pay almost nothing, since Gingrich has proposed cutting the capital gains tax rate to zero and Romney earns almost all of his money from investments.
6. Romney needs four lawyers, including the former IRS commissioner to defend his tax plan: Romney’s campaign held a conference call with reporters this morning to defend and explain his tax returns, and apparently felt the need to have former IRS Commissioner Fred Goldberg, along with three other top lawyers and his campaign communications director to explain the returns. At one point, the call had to be interrupted so officials could confer with mega accounting firm PricewaterhouseCoopers.
Another small revelation from Romney’s returns is that while Romney said his speaking fees amounted to “not very much” in terms of income, he actually made $111,000 in speaking fees in 2011 and $529,000 in 2010, as Politico’s Ken Vogel points out.
By: Alex Seitz-Wald, Think Progress, January 24, 2012
“Taxes At The Top”: Low Taxes On The Very Rich Are Indefensible
Call me peculiar, but I’m actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils — partly out of voyeurism, of course, but also because it’s about time that we had this discussion.
The theme of his dance, for those who haven’t been paying attention, is taxes — his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return.
Even then, however, he will face pressure to release previous returns, too — like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).
And the public has a right to see the back years: By 2011, with the campaign looming, Mr. Romney may have rearranged his portfolio to minimize awkward issues like his accounts in the Cayman Islands or his use of the justly reviled “carried interest” tax break.
But the larger question isn’t what Mitt Romney’s tax returns have to say about Mitt Romney; it’s what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden?
For they do. If Mr. Romney is telling the truth about his taxes, he’s actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes — major burdens on middle-class families — this implies that the top 400 filers faced lower taxes than many ordinary workers.
The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains — three-quarters of which go to the top 1 percent of the income distribution — warrant such special treatment.
Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false.
When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasn’t always thus — and the days when the superrich paid much higher taxes weren’t that long ago. Back in 1986, Ronald Reagan — yes, Ronald Reagan — signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clinton’s first term.
Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Children’s Health Insurance Program. And today’s ultralow rates — the lowest since the days of Herbert Hoover — date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq.
Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clinton’s first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut.
So is it essential that the rich receive such a big tax break? There is a theoretical case for according special treatment to capital gains, but there are also theoretical and practical arguments against such special treatment. In particular, the huge gap between taxes on earned income and taxes on unearned income creates a perverse incentive to arrange one’s affairs so as to make income appear in the “right” category.
And the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration.
So Mr. Romney’s tax dance is doing us all a service by highlighting the unwise, unjust and expensive favors being showered on the upper-upper class. At a time when all the self-proclaimed serious people are telling us that the poor and the middle class must suffer in the name of fiscal probity, such low taxes on the very rich are indefensible.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2012
America Is Not A Corporation
“And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”
That’s how the fictional Gordon Gekko finished his famous “Greed is good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.
Today, however, let’s focus on the rest of that sentence, which compares America to a corporation. This, too, is an idea that has been widely accepted. And it’s the main plank of Mitt Romney’s case that he should be president: In effect, he is asserting that what we need to fix our ailing economy is someone who has been successful in business.
In so doing, he has, of course, invited close scrutiny of his business career. And it turns out that there is at least a whiff of Gordon Gekko in his time at Bain Capital, a private equity firm; he was a buyer and seller of businesses, often to the detriment of their employees, rather than someone who ran companies for the long haul. (Also, when will he release his tax returns?) Nor has he helped his credibility by making untenable claims about his role as a “job creator.”
But there’s a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.
Why isn’t a national economy like a corporation? For one thing, there’s no simple bottom line. For another, the economy is vastly more complex than even the largest private company.
Most relevant for our current situation, however, is the point that even giant corporations sell the great bulk of what they produce to other people, not to their own employees — whereas even small countries sell most of what they produce to themselves, and big countries like America are overwhelmingly their own main customers.
Yes, there’s a global economy. But six out of seven American workers are employed in service industries, which are largely insulated from international competition, and even our manufacturers sell much of their production to the domestic market.
And the fact that we mostly sell to ourselves makes an enormous difference when you think about policy.
Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm’s owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.
But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.
Now, to be fair, being a career politician isn’t necessarily a better preparation for managing economic policy than being a businessman. But Mr. Romney is the one claiming that his career makes him especially suited for the presidency. Did I mention that the last businessman to live in the White House was a guy named Herbert Hoover? (Unless you count former President George W. Bush.)
And there’s also the question of whether Mr. Romney understands the difference between running a business and managing an economy.
Like many observers, I was somewhat startled by his latest defense of his record at Bain — namely, that he did the same thing the Obama administration did when it bailed out the auto industry, laying off workers in the process. One might think that Mr. Romney would rather not talk about a highly successful policy that just about everyone in the Republican Party, including him, denounced at the time.
But what really struck me was how Mr. Romney characterized President Obama’s actions: “He did it to try to save the business.” No, he didn’t; he did it to save the industry, and thereby to save jobs that would otherwise have been lost, deepening America’s slump. Does Mr. Romney understand the distinction?
America certainly needs better economic policies than it has right now — and while most of the blame for poor policies belongs to Republicans and their scorched-earth opposition to anything constructive, the president has made some important mistakes. But we’re not going to get better policies if the man sitting in the Oval Office next year sees his job as being that of engineering a leveraged buyout of America Inc.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 12, 2012
“Investment Baining”: Bitter Politics of Envy?
You’re just jealous. At least that’s how Mitt Romney sees it. The millionaire who posed for a picture with the boys at Bain Capital with the long green clinched between their teeth and poking out of their collars and jackets now says that people who question what he did there, and what rich people do now, are just green with envy.
In his New Hampshire victory speech on Tuesday, Romney lambasted his Republican opponents (who have raised real issues about his role at the private equity firm Bain Capital) for following the lead of President Obama, whom he described as a leader who divides us “with the bitter politics of envy.”
The next day on “Today” on NBC, Romney defended the statement, rejecting the notion that there were questions about Wall Street behavior, saying the whole discussion was about class warfare. He even went so far as to suggest that such talk shouldn’t even be openly entertained. When the interviewer asked, “Are there no fair questions about the distribution of wealth without it being seen as envy, though?” Romney responded, “I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like.”
In quiet rooms? That’s the problem. Too many have been too quiet for too long. And, on this point, we must applaud the efforts of the Occupy Wall Street movement. It took income inequality and corporate responsibility out of the shadows and into the streets.
A report released on Wednesday by the Pew Research Center found that about two-thirds of Americans now perceive a strong conflict between the rich and poor in this country. That was up 19 percentage points from 2009.
As The New York Times pointed out in regard to the report, “conflict between rich and poor now eclipses racial strain and friction between immigrants and the native-born as the greatest source of tension in American society.”
And this has nothing to do with envy and everything to do with fairness.
Elizabeth Warren, who is now running for the Senate seat that Romney ran for in 1994 and didn’t get, probably rebuts this myth of class warfare best by reframing the discussion in terms of a “social contract” between the rich and the rest of society. At one of her campaign events, she explained:
“There is nobody in this country who got rich on his own. Nobody. You built a factory out there, good for you. But, I want to be clear: you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory and hire someone to protect against this because of the work the rest of us did. Now look, you built a factory and it turned into something terrific or a great idea. God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
That is the corporate Contract With America: societal symbiosis. We create a society in which smart, hard-working people can be safe and prosper, and they in turn reinvest a fair share of that prosperity back into society for posterity.
Everyone benefits.
But somewhere along the way this got lost. Greed got good. The rich wanted all of the societal benefits and none of the societal responsibilities. They got addicted to seeing profits go up and taxes go down, by any means necessary, no matter the damage to the individual or the collective. Those Maseratis weren’t going to pay for themselves.
And the resulting income inequality helped to stall economic mobility.
As The New York Times reported last week, “many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe.” The Times report speculated that: “One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.”
Indeed, a November report by the Pew Charitable Trusts’ Economic Mobility Project pointed out, “In the United States, there is a stronger link between parental education and children’s economic, educational, and socio-emotional outcomes than in any other country investigated.”
Pew has found that most children raised at the top of the income spectrum stay there and most raised at the bottom stay at the bottom.
An equal opportunity to success is central to this country’s optimistic ethos, but income inequality and corporate greed are making a lie of that most basic American truism. The rich and their handmaidens on the political right have consolidated America’s wealth on the ever-narrowing peak of a steep hill and greased the slope. And they want to cast everyone at the bottom as lazy or jealous, without acknowledging the accident of birth and collusion of policies that helped grant them their perch.
Income inequality is a threat to this country and the middle class that made her great. If Romney wants to be president, he needs to understand that.
As Alan Krueger, the chairman of the White House Council of Economic Advisers, said on Thursday, “I think it is clear that we can’t go back to the type of policies that exacerbated the rise in inequality and threatened economic mobility in the first place if we want an economy that builds the middle class.”
Not envy Mr. Romney. Opportunity.
By: Charles Blow, Op-Ed Columnist, The New York Times, January 13, 2012
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