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“No, We Don’t Dig It”: What We Still Don’t Know About Mitt Romney’s Taxes

With the documents Mitt Romney released recently, we know a bit more about his taxes.

We know, for instance, that Romney paid a rate of 14.1 percent on $13.7 million in income on his 2011 tax return, which he achieved by purposely overpaying. Though he was entitled to deduct $4 million in charitable contributions, Romney deducted only $2.25 million to keep his tax rate above 13 percent.

(Romney, it has been pointed out, could file an amended return to claim the full deduction after the election. We’ve contacted the Romney campaign, and Michele Davis, a spokeswoman, assured us he would not do so.)

We know, according to a letter from his accountants at PricewaterhouseCoopers, that Romney has paid state and federal income taxes each year since at least 1990, which would seem to disprove Senate Majority Leader Harry Reid’s claim in July that Romney had not paid any taxes for a decade.

And we know that Romney’s tax rate since 1990 never dipped below 13.66 percent, according to his accountants. Romney paid an average effective tax rate between 1990 and 2009 of 20.2 percent.

But there’s still a lot we don’t know. “I think most of the major questions we had before [last Friday] are still out there,” said Brian Galle, a tax law professor at Boston College. Here are a few:

How much did Romney make before 2010?

While Romney has disclosed his average effective tax rate for the last two decades, he hasn’t said how much he earned in those years or how much — the dollar amount — he paid in taxes.

That’s an important distinction, said Daniel Shaviro, a tax law professor at New York University. Various tax-planning strategies may have enabled Romney to reduce his adjusted gross income in some years.

In 2008, for instance, investors everywhere lost money when the stock market tanked. Romney may have carried those losses forward, Shaviro said, and used them to reduce his adjusted gross income in 2009. While we know Romney paid at least 13.66 percent of the income he recorded on his taxes in a given year, we don’t know what percentage he paid of the money actually took home that year.

Why is Romney’s IRA worth so much?

Much of Romney’s wealth sits in his IRA, which is worth as much as $101.6 million. It’s a remarkable number, in part because Romney would have been able to contribute a maximum of $30,000 a year to his IRA while he was at Bain, from 1984 to 1999.

Galle, the Boston College tax law professor, said the most likely explanation for the outsized IRA is that Romney put in shares in Bain investments that swelled in value. According to the Wall Street Journal, Bain allowed employees to buy a special class of shares in the firm’s investments. The shares didn’t cost very much, but they could be extremely lucrative. In one deal, the Journal reported, “some Bain employees saw a 583-fold increase” in the value of their shares — an astronomical return. Because the shares were in IRAs, the profits could be plowed into new Bain deals without subtracting taxes.

Romney also may have beefed up his IRA by contributing “carried interest” — a share of the profits in funds managed by Bain. As Reuters reported earlier this year, any potential carried interest would “not be disclosed in his personal financial summary or on a federal income tax return.” In other words, even if Romney released all his tax returns, we still might not know exactly how he accumulated his huge IRA.

What about Romney’s investments offshore?

We know many of Romney’s IRA investments are based in foreign countries but it’s hard to know how much. He valued one account in the Cayman Islands at anywhere between $5 million and $25 million.

One thing we do know is that Romney pays a far lower tax rate overseas than he does here. According to Quartz, Romney paid only 2.4 percent in foreign taxes in 2011 on the $3.5 million he earned abroad.

We also know where Romney’s current overseas investments are held —Bermuda, the Cayman Islands, Switzerland, Luxembourg — and many of the firms he has invested in, including a state-owned Chinese oil company and a Chinese bank that Romney’s family trusts sold their stake in last year. But we don’t have a lot of other important documentation, including forms would show whether Romney had, as the New York Times has reported, “over the years declared all of his foreign income to the IRS in a timely manner.”

The Wall Street Journal has reported that Romney’s offshore IRA investments likely helped him avoid a little-known tax called the unrelated business income tax. The tax, “meant to discourage tax-exempt entities such as an IRA or college endowment fund from unfairly competing with for-profit, taxpaying entities by operating a business without paying taxes on it,” could have hit Romney at up to 35 percent.

The Romney campaign seems unlikely to release any more information about his finances, but that hasn’t kept reporters from digging it up. Bloomberg, for instance, analyzed securities filings to report last Thursday that Romney has set up a type of trust known as an “I Dig It” trust — a legal way for Romney to avoid estate and gift taxes and pass some of his fortune onto future generations.


By: Theodoric Meyer, Propublica, October 1, 2012

October 2, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

“The Irreplacable Workers”: The Amalgamated Pole Vaulters

A common refrain among union critics is that Americans no longer need unions—that unions were well and good for the exploited sweatshop workers of a century ago, but today’s empowered Americans need no such crutch.

With workers’ incomes falling, and with the United States leading all industrial nations in the percentage of its workers in low-wage jobs, it’s increasingly clear that today, we need unions for many of the same reasons that the workers of 1912 did: They’re exploited and underpaid. But if it’s only the nation’s most exploited workers who need to band together, why have America’s most talented employees formed unions of their own?

Actors, writers, directors, and cinematographers all have unions. Baseball, football, and basketball players have unions. And now, reports, America’s track and field athletes want a union of their own as well.

The immediate grievance that has spurred the athletes to action is Rule 40 of the International Olympic Committee (IOC), which prohibits Olympic athletes from advertising for non-Olympic sponsors in the days leading up to and then during the Olympic games—that is, when they are most marketable. Rather than just trying to get the IOC to change this one provision, however, the athletes have decided to form a union to win more power for themselves with the IOC on a host of issues.

Among the leaders of this effort is Olympics star Sanya Richards-Ross, who told ESPN:

I’ve seen my husband [Aaron Ross, a cornerback for the Jacksonville Jaguars], who has been in the NFL for six years, an I’ve seen what a strong players’ union does, not only for the benefit of the players but the benefit of the sport. … There are unions in every industry because they need to have that voce, not just for financial reasons but for consideration of other things.

Scott Blackmun, the CEO of the United States Olympic Committee, expressed openness to the athletes’ initiative. While declining to comment on their specific proposal, he told ESPN, “I understand the desire and need on the part of the athletes to try and create some real estate they can sell during the 16 days they’re really at the peak of their careers, so I am sympathetic to the need and desire to do that.”

Not exactly a union-busting tirade. But then, Blackmun can’t parrot the standard talking points of most American CEOs. He can’t go after Richards-Ross and the other athletes leading the union initiative as outside agitators or cynical union bosses. He can’t because the athletes are irreplaceable. And in American labor relations today, it’s only the irreplaceable workers, paradoxically, who can unionize.

As a stream of studies has demonstrated, most organizing drives founder because management fires a number of the workers involved. (It’s illegal to fire them, but the penalties are negligible.) Just about the only workers who can unionize without fear of being fired are workers whom management can’t replace—the famous, the highly skilled. That’s why athletes and entertainers can organize and strike. Airline pilots can be replaced, but not immediately, not in large numbers. If they strike, they wreak havoc on the nation’s travel.

American management’s war on unions has already helped reduce the percentage of unionized private-sector workers from 35 percent in the middle of the last century to less than 7 percent today. One day soon, the only remaining unionized workers may be America’s most celebrated and talented employees. And the fact that even they need a union to win better compensation and safer working conditions makes it pretty clear that every other employee needs one, too.

By: Harold Meyerson, Editor-at-Large, The American Prospect, September 25, 2012

September 27, 2012 Posted by | Unions | , , , , , , , , | Leave a comment

Obama Isn’t Trying To Start ‘Class Warfare’ — He Wants To End The Republican War On The Middle Class

History will record that on September 19, 2011, the Republicans made a huge political miscalculation — a miscalculation that could potentially doom their chances for victory next year.

If I were a Republican, the last thing I’d want to talk about is “class warfare.”

For 30 years — whenever they have been in power — Republicans and their Wall Street/CEO allies have conducted a sustained, effective war on the American middle class.

Much of the success of their war has resulted from their insistence that it didn’t exist.  They have talked instead about how the economy needs to reward all those “job creators” whose beneficence will rain down economic prosperity on the rest of us.

They fund right-wing organizations that divert our attention by whipping up worry that gay marriage will somehow undermine heterosexual relationships.  They start wars that help pad the bottom lines of defense contractors but do nothing to make us safer.

And all the while they quietly rig the economic game so that all of the growth in the Gross Domestic Product goes into the hands of the top two percent of the population — while they cut our pay, destroy our unions and do their level best to cut our Social Security and Medicare.

There has been a “class war” all right — a war on the middle class.  And the middle class has been on the losing end.

Today the truly rich control a higher percent of our wealth and income than at any other time in generations.  Income inequality is higher than at any time since 1928 — right before the Great Depression.

According to the Economic Policy Institute, “the richest five percent of households obtained roughly 82 percent of all the nation’s gains in wealth between 1983 and 2009. The bottom 60 percent of households actually had less wealth in 2009 than in 1983… ”

Today, 400 families control more wealth than 150 million Americans — almost half of our population.

American workers have become more and more productive — but they haven’t shared in the income generated by that increased productivity, so now they can’t afford to buy the products and services they produce.

The success of the Wall Street/CEO/Republican war on the middle class rests, in part, in the old frog in boiling water story.  If you put a frog in a pot of boiling water, they say, the frog will jump right out.  But if you put a frog in a pot and gradually turn up the heat until it boils you end up with a cooked frog.

Republican policies have gradually shifted wealth, income and power from the middle class — and those who aspire to be middle class — into their own hands and for obvious reasons they haven’t wanted to focus too much attention on “class warfare.”

So now if the Republicans want to talk about “class warfare” — in the words of George Bush — “bring ’em on.”

In fact, President Obama isn’t proposing to start a “class war” — he wants to end the war on the middle class.

Among other things, he has proposed that America live by the “Buffett Rule” — by Warren Buffett’s suggestion that he and his fellow billionaires should have to pay effective tax rates at least as high as their own secretary’s.

Obama pointed out yesterday that requiring hedge fund managers to pay effective tax rates as high as plumbers and teachers was not “class warfare.” The choice is clear: either you increase taxes on the wealthy — or dramatically cut Medicare, Medicaid and Social Security benefits. It is, as the President said, “simple math.”

Whereas Republican proposals to rein in the deficit by cutting Social Security, Medicare and Medicaid benefits are intended to continue this war on the middle class, the President’s plan — in stark contrast — addresses the three factors that actually caused the deficit in the first place.

From 1993 until 2000, Bill Clinton had successfully pushed back much of the Republican anti-middle class agenda.  When he left office, America had a prosperous, growing economy, increasing middle class incomes, and budget surpluses as far as the eye could see.

Bush changed all that. The anti-middle class warriors were back in power, and they took the offensive.  They passed massive new tax breaks for the rich, and set out to break unions.

Three Bush/Republican policies led directly to today’s deficit:

• Giant tax cuts for the wealthy;
• Two unpaid-for wars that will ultimately cost trillions;
• Trickle-down economic policies that did not create one net private sector job and ultimately caused the financial collapse that led to the Great Recession.

The Obama deficit proposal reduces the deficit by directly addressing these three factors — that actually caused the deficit — rather than demanding that the budget be balanced by taking even more out of the pockets of ordinary Americans.

A trillion dollars — 1.2 trillion with interest — is cut by ending the Wars in Iraq and Afghanistan. Those who argue that you shouldn’t count these reductions toward deficit reduction, because Obama already planned to end these wars, are ignoring the fact that they were a big reason why we have a deficit in the first place.

Second, Obama’s proposal eliminates the Bush tax cuts for the rich — and demands that millionaires, billionaires, oil companies, and CEO’s who fly around in corporate jets, pay their fair share.

Finally, the Obama plan includes a robust jobs package to jumpstart the economy and put America back to work.  The Republicans have no jobs plan at all — none whatsoever.  In fact, their plan is to simply let the Wall Street bankers and CEO’s continue to siphon as much as possible from the pockets of ordinary Americans.

The combination of Obama’s jobs and budget plans have set the stage for a clear, sharp battle for the soul of America. They have posed a stark contrast that is not framed as a battle over conflicting policies and programs — but as a struggle between right and wrong.

That battle will continue throughout this fall — and into next year’s elections.

These proposals, coupled with the President’s urgent, passionate advocacy, have transformed the political landscape.

The major iconic fights that will dominate American politics over the next 14 months will be the President’s jobs proposal, his call on millionaires and billionaires to pay their fair share, and the Democratic defense of Social Security, Medicare and Medicaid.

Democrats and Progressives have the high political ground on every one of these defining issues — and I don’t just mean slightly higher political ground — I mean political ground like Mount Everest.

By huge margins, Americans prefer to raise taxes on millionaires and billionaires rather than cut Social Security and Medicare.  The choice is not even close — in most polls something like 8 to 1.

And who can possibly question that the number one priority of voters everywhere in America is jobs?

The Republican policies that led to the Great Recession did more damage than anyone knew.  Many Republicans actually thought they would benefit politically by the long, slow economic slog that ensued in its aftermath. After all, no sitting President had won re-election in a century when the economy was not good or materially improving — except one.

Harry Truman won re-election in the midst of a bad economy in 1948 by running against the “Do-nothing Republican Congress.”

President Obama’s jobs and budget proposals have set the stage for just that kind of battle.

His proposals have simultaneously energized the progressive base and appealed to middle class swing voters — especially seniors — who agree entirely that the government should keep its hands off the Social Security and Medicare benefits they have earned, and turn instead to taxes on millionaires and billionaires to close the budget deficit that the Republican “class warfare” policies have created.

And it won’t hurt that these proposals have prompted the Republicans to turn the spotlight on the subject of “class warfare” itself.  They should be careful what they wish for.


By: Robert Creamer, Strategist and Author, Published in HuffPost, September 20, 2011

September 24, 2011 Posted by | Congress, Conservatives, Corporations, Deficits, Democrats, Economic Recovery, Economy, Elections, Federal Budget, GOP, Government, Ideologues, Ideology, Medicare, Politics, President Obama, Republicans, Right Wing, Social Security, Teaparty, Wall Street, Wealthy | , , , , , , , , , | Leave a comment

Quality Vs Quantity: Yes, We Need Jobs. But What Kind?

On Thursday, President Obama will deliver a major speech on America’s employment crisis. But too often, what is lost in the call for job creation is a clear idea of what jobs we want to create.

I recently led a research team to the Rio Grande Valley in Texas, where Gov. Rick Perry, a contender for the Republican presidential nomination, has advertised his track record of creating jobs. From January 2000 to January 2010, employment in the Valley grew by a remarkable 42 percent, compared with our nation’s anemic 1 percent job growth.

But the median wage for adults in the Valley between 2005 and 2008 was a stunningly low $8.14 an hour (in 2008 dollars). One in four employed adults earned less than $6.19 an hour. The Federal Reserve Bank of Dallas reported that the per capita income in the two metropolitan statistical areas spanning the Valley ranked lowest and second lowest in the nation.

These workers aren’t alone. Last year, one in five American adults worked in jobs that paid poverty-level wages. Worker displacement contributes to the problem. People who are laid off from previously stable employment, if they are lucky enough to find work, take a median wage hit of over 20 percent, which can persist for decades.

To understand the impact of low wages, in the Valley and elsewhere, we interviewed a wide range of people, including two directors of public health clinics, three priests, a school principal and four focus groups of residents. Everyone described a life of constantly trying to scrape by. One month they might pay for the phone, another, for utilities. Everyone knew how long each company would carry unpaid bills before cutting service. People spoke not only of their fear of an unexpected crisis — an illness, a broken car — but also of the challenge of paying for basic needs like school supplies. Many used the phrase “one paycheck away from homelessness.”

Because their parents cannot afford child care, children move among relatives and neighbors. They watch too much TV. They don’t finish their homework. Older children grow up too fast from parenting their younger siblings. As one person observed, “All you think about is which bill is more important.”

Economic stress strains marriages. Parents cannot afford quinceañeras for their daughters. In church youth groups, teenagers ask why they should stay in school if all they can get are low wages.

Many children are latchkey kids. Accidents are frequent; we heard of an elementary school student who badly burned himself in a science experiment, with his older brother watching. Their father couldn’t take time off from work to visit his son in the hospital. Children come to school sick. Parents miss teacher conferences because they can’t afford time off. Type 2 diabetes is a scourge in the Valley. Since Type 2 diabetics can be asymptomatic for years, many don’t buy medicine; as time passes, they become severely ill, often losing sight or a limb.

The director at one clinic, with nearly 70,000 visits a year, estimated that half of its patients had anxiety or depression. Often people can’t get to the clinic because they cannot afford to lose work time or because gas costs too much. When they go, they take their families, because they have no child care.

And yet the Valley is not hopeless. Teachers stay late to help with homework. They make home visits to meet parents. Health clinic employees work overtime. The community organization Valley Interfaith has pushed for training opportunities and living-wage jobs. There is no “culture of poverty,” but the low-wage economy has corrosive and tragic consequences.

Must we choose between job quality and quantity? We have solid evidence that when employees are paid better and given more opportunities within a company, the gains outweigh the costs. For example, after a living wage ordinance took effect for employees at the San Francisco International Airport, in 1999, turnover fell and productivity rose.

Contrary to the antigovernment rhetoric, there is much that the public sector can do to improve the quality of jobs.

A recent analysis by the Economic Policy Institute reported that 20 percent of federal contract employees earned less than the poverty level for a family of four, as opposed to 8 percent of traditional federal workers. Many low-wage jobs in the private sector (notably, the health care industry) are financed by taxpayers. The government can set an example by setting and enforcing wage standards for contractors.

When states and localities use their zoning powers to approve commercial projects, or offer tax incentives to attract new employers, they can require that workers be paid living wages; research shows this will not hurt job growth.

Labor standards have to be upgraded and enforced, particularly for those employers, typically in low-wage industries, who engage in “wage theft,” by failing to pay required overtime wages or misclassifying workers as independent contractors so that they do not receive the benefits to which they are entitled.

Americans have long believed that there should be a floor below which job quality does not fall. Today, polls show widespread support for upgrading employment standards, including raising the minimum wage — which is lower, in inflation-adjusted terms, than it was in 1968. It’s time for the federal government to take the lead in creating not just more jobs, but more good jobs. The job-growth mirage of the Rio Grande Valley cannot be our model.

By:  Paul Osterman, Op-Ed Contributor, The New York Times, September 5, 2011

September 6, 2011 Posted by | Businesses, Class Warfare, Conservatives, Corporations, Economic Recovery, Economy, Education, Government, Jobs, President Obama, States, Teachers, Unemployment | , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Morally Inept: The New GOP Resentment Of The Poor

In a decade of frenzied tax-cutting for the rich, the Republican Party just happened to lower tax rates for the poor, as well. Now several of the party’s most prominent presidential candidates and lawmakers want to correct that oversight and raise taxes on the poor and the working class, while protecting the rich, of course.

These Republican leaders, who think nothing of widening tax loopholes for corporations and multimillion-dollar estates, are offended by the idea that people making less than $40,000 might benefit from the progressive tax code. They are infuriated by the earned income tax credit (the pride of Ronald Reagan), which has become the biggest and most effective antipoverty program by giving working families thousands of dollars a year in tax refunds. They scoff at continuing President Obama’s payroll tax cut, which is tilted toward low- and middle-income workers and expires in December.

Until fairly recently, Republicans, at least, have been fairly consistent in their position that tax cuts should benefit everyone. Though the Bush tax cuts were primarily for the rich, they did lower rates for almost all taxpayers, providing a veneer of egalitarianism. Then the recession pushed down incomes severely, many below the minimum income tax level, and the stimulus act lowered that level further with new tax cuts. The number of families not paying income tax has risen from about 30 percent before the recession to about half, and, suddenly, Republicans have a new tool to stoke class resentment.

Representative Michele Bachmann noted recently that 47 percent of Americans do not pay federal income tax; all of them, she said, should pay something because they benefit from parks, roads and national security. (Interesting that she acknowledged government has a purpose.) Gov. Rick Perry, in the announcement of his candidacy, said he was dismayed at the “injustice” that nearly half of Americans do not pay income tax. Jon Huntsman Jr., up to now the most reasonable in the Republican presidential field, said not enough Americans pay tax.

Representative Eric Cantor, the House majority leader, and several senators have made similar arguments, variations of the idea expressed earlier by Senator Dan Coats of Indiana that “everyone needs to have some skin in the game.”

This is factually wrong, economically wrong and morally wrong. First, the facts: a vast majority of Americans have skin in the tax game. Even if they earn too little to qualify for the income tax, they pay payroll taxes (which Republicans want to raise), gasoline excise taxes and state and local taxes. Only 14 percent of households pay neither income nor payroll taxes, according to the Tax Policy Center at the Brookings Institution. The poorest fifth paid an average of 16.3 percent of income in taxes in 2010.

Economically, reducing the earned income tax credit and the child tax credit — which would be required if everyone paid income taxes — makes no sense at a time of high unemployment. The credits, which only go to working people, have always been a strong incentive to work, as even some conservative economists say, and have increased the labor force while reducing the welfare rolls.

The moral argument would have been obvious before this polarized year. Nearly 90 percent of the families that paid no income tax make less than $40,000, most much less. The real problem is that so many Americans are struggling on such a small income, not whether they pay taxes. The two tax credits lifted 7.2 million people out of poverty in 2009, including four million children. At a time when high-income households are paying their lowest share of federal taxes in decades, when corporations frequently avoid paying any tax, it is clear who should bear a larger burden and who should not.

By: Editorial, The New York Times, August 30, 2011

September 1, 2011 Posted by | Class Warfare, Congress, Conservatives, Consumers, Corporations, Democracy, Economic Recovery, Economy, Elections, GOP, Government, Ideologues, Ideology, Income Gap, Jobs, Labor, Lawmakers, Middle Class, Politics, Public, Republicans, Right Wing, Tax Credits, Tax Hike Prevention Act 2010, Tax Increases, Tax Loopholes, Taxes, Teaparty, Unemployed, Voters, Wealthy | , , , , , , , , , , , , , , , | Leave a comment

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