By: Eugene Robinson, Opinion Writer, The Washington Post, January 26, 2012
“Greed Is Good?”: The GOP Seems To Be Okay With That
If you heard a loud “gulp” Tuesday night after President Obama’s State of the Union address, it probably came from Republican political strategists as they realized their party’s odds of capturing the White House this fall are getting longer. Obama may be no Ronald Reagan, but he’s no Jimmy Carter, either.
The obligatory list of accomplishments and initiatives was embellished with bits and pieces of what will likely be Obama’s standard campaign speech. At the heart of his argument for a second term is his assertion that the American dream of upward mobility has been hijacked — that the rich and the powerful have rigged our economic and political systems to favor their interests over those of the average citizen.
Obama sounded this theme several times, perhaps most effectively when he decried policies that allow billionaire Warren Buffett to pay a lower income-tax rate than does his longtime secretary, Debbie Bosanek, who sat with first lady Michelle Obama in her box Tuesday night:
“We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get a tax break I don’t need and the country can’t afford, it either adds to the deficit or somebody else has to make up the difference — like a senior on a fixed income, or a student trying to get through school, or a family trying to make ends meet.
“That’s not right. Americans know that’s not right. They know that this generation’s success is only possible because past generations felt a responsibility to each other, and to the future of their country, and they know our way of life will only endure if we feel that same sense of shared responsibility.”
There are some Republicans who can’t wait to take the issue of Buffett’s tax rate vs. Bosanek’s head-on. They are eager to argue that one of the world’s richest men deserves to pay a lower rate because his income derives from job-creating investments. These Republicans presumably consider his secretary a mere salaried employee who spends her money on such fripperies as, you know, food, shelter, clothing and transportation.
“The issue I think that’s going to play out this election is that question of Warren Buffett’s secretary,” House Majority Leader Eric Cantor, R-Va., said Wednesday on CNN. “We want her to make more money, we want her to have more hope for the future. . . . [But] this notion that somehow the income that Warren Buffett makes is the same as a wage income for his secretary, we know that’s not the same.”
In other words, it’s not just that the rich are better than the rest of us but also that their money is better than our money.
Is this really an argument the Republican presidential nominee is going to make? Not in so many words, surely. Newt Gingrich and Rick Santorum seem to understand that taking Cantor’s line would constitute political malpractice.
Mitt Romney may get it, too, but he has little room to maneuver. Romney’s wealth must be very special, indeed, to deserve vacations in Switzerland and the Cayman Islands, where he likes to park his money. But I digress.
Perhaps more of a political problem, from the GOP’s point of view, is Obama’s riff on shared responsibility. Republicans seem eager to double down on a “greed is good” ethos that has more resonance when the economy is booming, real estate values are soaring and everybody feels rich. Obama, by contrast, envisions a return to an America where the successful and fortunate lend a helping hand to those down on their luck, rather than coldly leave them behind. This seems much more in tune with the times.
Indiana Gov. Mitch Daniels, delivering the Republican response, offered an alternative that many voters might find cogent and unthreatening. He didn’t provide a lot of new ideas — basically, Daniels supports the same laissez-faire policies that got us into this crisis — but at least he didn’t sound like some kind of Ayn Rand acolyte who believes that economic Darwinism must always be allowed to run its course.
Daniels isn’t running for president, though, and the pragmatic conservatism he described — one that imagines a role for government — is out of touch with the radicalism that dominates his party. The Republicans who are running the party laugh at the concepts of fairness and collective responsibility. Soon they may find the joke’s on them.
Three Key Questions Raised By Romney’s Tax Revelations
Mitt Romney’s campaign has tried desperately to put a lid back on the can of worms that burst open weeks ago when the one-time GOP presidential front runner declined to release any of his tax returns.
But by actually releasing his 2010 return, and an estimation of his 2011 return, camp Romney has provided reporters with some, but not all, of the answers they’re looking for as they try to paint a complete picture of the finances of one of the wealthiest candidates for President in U.S. history.
Romney’s revelations confirm that his effective tax rates in the past couple years have been as low or lower than those of workers with truly modest means. They also confirm that he’s availed himself of truly complex tax strategies designed to boil his liability down to the lowest level allowed by the country’s heavily rigged, labyrinthine tax code. And we know, too, that these are things Romney didn’t want voters to know — at least not yet.
But they raise a series of new questions that will likely require Romney to disclose several years’ worth of additional tax returns if he wants to answer them satisfactorily. Here are three big ones that touch generally on the theme of Romney’s efforts to reduce his tax burden by taking advantage of areas of the law that simply aren’t available to most people.
How Low Do They REALLY Go
Romney’s effective tax rate was 13.9 percent of his adjusted gross income (AGI) in 2010, and is expected to be slightly higher in 2011. Set aside for now the fact that for a high net worth individual like Romney, AGI often understates what you might call “true” income — meaning these effective tax rates probably overstate Romney’s 2010 and 2011 tax liability. It turns out that in 2009, in the wake of the financial crisis, Romney very likely managed to get his effective tax rate much lower than 13.9 percent. In 2010, Romney carried over $4.9 million in capital losses from 2009. This is a consequence of the tax code’s leniency toward investors who take hits in bad years. But as tax lawyer Ed Kleinbard told reporters during a Tuesday conference call organized by the DNC, “that means he paid no tax on any of his capital gains in 2009, including tax on his carried interest in 2009.” That’s not necessarily because Romney actually lost money in 2009, either. As Kleinbard explained, a common tactic for Americans with capital gains is to “harvest” — by selling off certain investments that lose value investors can count the losses against gains elsewhere in their portfolios. If those losses exceed the gains by more than a certain amount, they roll over into the following tax cycle. Unless Romney had significant sources of non-investment income, that suggests his effective tax rate in 2009 was much lower than 13.9 percent. And remember, he jokes he’s been unemployed for years.
That UBIT Bit
One of camp Romney’s chief claims has been that his offshore investments haven’t been covers for deferring or avoiding U.S. taxation. But as described, here, there is one tax strategy that could have allowed Romney to avoid a big, 35 percent tax on unrelated business income, as it pertains to his massive individual retirement account — if that account is invested in an offshore entity. When asked Tuesday if Romney has ever benefited from this strategy, his trust adviser Brad Malt said, “I don’t know the answer to that — let us get back to you on that.” We haven’t received an answer yet, but we’ll pass it along when we get it.
Swiss Amiss?
Romney’s 2010 tax return reveals a Swiss bank account. “It is listed because I set that account up for diversification in 2003 when I became trustee of the blind trusts,” Malt said. “It is a bank account. Nothing more, nothing less. An ordinary bank account. It earns some income which is fully reported on the form 1040. In the 2010 tax return, you’ll see approximately $1,700 in interest earned by this account, which is reported. The tax is fully paid just as if this were a U.S. bank account. Nothing more complicated than that. By the way, I did close this account in early 2010. It no longer exists.”
Some reports suggest that the account was closed for political reasons, but Malt said “I regularly review Governor Romney’s investments just in connection with my periodic reviews, I decided that this account wasn’t serving any particular purpose….Again, taxes were all fully paid etc. But it just wasn’t worth it. And I closed the account.” Tax experts have noted to TPM in recent days that U.S. law changed shortly before then, to make it harder for U.S. persons to avail themselves of tax havens. Shortly thereafter the IRS gave people secreting their money abroad a time window for compliance. Taking camp Romney at its word, that wasn’t really their concern. Even if the account existed for purposes of diversification that could be politically embarrassing in and of itself, constituting a bet against U.S. currency. But to fully answer the question, we’d need to know if that bank account is declared in the years before the law changed. Camp Romney did not respond to a request for comment on this point Tuesday.
By: Brian Beutler, Talking Points Memo, January 25, 2012
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
What “Not Very Much” Income Is To Mitt Romney
In all things economic, the former Massachusetts governor is a veritable gaffe machine.
Up until now, Mitt Romney has refused to release his tax returns, something that he surely knew would eventually become an issue. And it isn’t too hard to figure out why. When you’re struggling to get past your image as an out-of-touch rich guy, having front-page stories about the millions you’re pulling in isn’t something you’d look forward to. And in Mitt’s case, there are really two problems.
The first is his income, which we can be pretty sure is in the seven figures. And this is despite the fact that he hasn’t actually held a job in years. Unlike people who work for a living, Romney makes money when his money makes him more money. Which leads us to the second problem: the tax rate he pays. Because our tax system treats investment income more favorably than wage income, Romney probably pays the capital gains tax rate of 15 percent on most of his income, as opposed to the 33 percent marginal rate he’d be paying if that money were wages. Which is what Romney was forced to admit yesterday, when he said, “It’s probably closer to the 15 percent rate than anything.” But here’s where Mitt’s tone-deafness on these kinds of issues comes, once again, to bite him:
The vast majority of the income Mr. Romney reported over 12 months in 2010 and ‘11 was dividends from investments, capital gains on mutual funds and his post-retirement share of profits and investment returns from Bain Capital, the firm he once led. And Mr. Romney also noted that he made hundreds of thousands of dollars from speaking engagements.
“I got a little bit of income from my book, but I gave that all away,” Mr. Romney told reporters after an event here. “And then I get speakers’ fees from time to time, but not very much.”
Financial disclosure forms that candidates are required to file annually shows that Mr. Romney earned $374,327.62 in speakers’ fees from February of 2010 to February of 2011, at an average of $41,592 per speech.
Oh Mitt, you really are the gift that keeps on giving. A smarter candidate would say, “I’ve been very fortunate to make significant amounts of money from giving speeches.” But Mitt describes $374,327 in speaking fees in one year as “not very much.” If you put that amount into the Wall Street Journal‘s handy calculator, it turns out that if those speaking fees were the only income Mitt had, he’d still be richer than 98 percent of Americans. But those speaking fees, apparently, are “not very much” to him.
Just to be clear, I don’t think that the fact that Romney considers an amount of income that most of us will never dream of earning “not very much” doesn’t mean he’d be a bad president, in and of itself. But like all Republicans, Romney thinks there’s nothing wrong with the fact that money you get for working gets taxed at a higher rate than money you make for selling a stock or having your grandfather die and leave you a few million, and he’d like to make that disparity even more extreme.
Romney now says he’ll probably release his 2011 returns in April. Which guarantees that there will be plenty of time for the Obama campaign to keep talking about it in anticipation of the big event. At the current rate, he should commit about one head-shaking gaffe per week on economic issues between now and then.
By: Paul Waldman, The American Prospect, January 17, 2012
Good News!: If Top Tax Rates Return To Reagan Era, Bill O’Reilly Might Quit
Fox News’ Bill O’Reilly boasted the other day that he enjoys “more power than anybody other than the president.”
Apparently, though, this rather extraordinary degree of influence over national affairs isn’t quite enough for the conservative media personality. In fact, O’Reilly is so concerned about his potential tax burden under the “Buffett Rule,” he told his television audience last night he might just quit working altogether.
“I must tell you I want the feds to get more revenue. I don’t want to starve them as some people do. We need a robust military, a good transportation system and protections all over the place.
“But if you tax achievement, some of the achievers are going to pack it in. Again, let’s take me. My corporations employ scores of people. They depend on me to do what I do so they can make a nice salary. If Barack Obama begins taxing me more than 50 percent, which is very possible, I don’t know how much longer I’m going to do this. I like my job but there comes a point when taxation becomes oppressive. Is the country really entitled to half a person’s income?”
In case anyone’s interested in the relevant details, let’s clarify a few things.
First, we don’t know if President Obama is eyeing a top rate of 50%, and even if he did, the likelihood of congressional passage would be roughly zero.
Second, a top rate of 50% does not mean O’Reilly would lose “half” his income. I know this can seem a little complicated, but that’s just not how marginal tax rates work.
And third, a 50% top rate for millionaires and billionaires would be a departure from the recent past, but to describe it as “oppressive” is to forget much of the 20th century.
In Ronald Reagan’s first term, for example, the top rate was — you guessed it — 50%. Did Reagan’s “oppressive” tax rates prevent robust economic growth? Did “the achievers” decide to “pack it in”? No and no.
For nearly all of Dwight Eisenhower’s presidency, the top rate was 91%. That’s not a typo. Did this Republican president’s “oppressive” tax policy prevent the U.S. economy from growing in the 1950s? Apparently not.
That said, if O’Reilly is contemplating retirement to avoid helping America pay its bills, I’m not inclined to discourage him.
By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, September 20, 2011
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