The night before Mitt Romney made public his 2010 and estimated 2011 tax returns, debate moderator Brian Williams highlighted what the Governor was willing to share only in private. Williams recalled, "You said during the McCain vetting process," Williams recalled of Romney's failed effort to secure the GOP VP spot in 2008, "you turned over 23 years which you had at the ready because, to quote you, you`re something of a packrat." But the American people have learned nothing about either those 23 years or the two (in 2008 and 2009) that came after them.
Nothing, that is, until now. As TPM's Brain Beutler explained, Mitt Romney net-net may have earned no income from capital gains, dividends or carried interest income in 2008 and 2009:
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.
Now, many Americans suffered large losses on their investments in 2008 and 2009, losses they spread out across three years of their IRS filings. Mitt Romney may very well have been no different. But then again, in 2008 Romney had a powerful motivation to "harvest" some of his investments to offset gains elsewhere in his portfolio. He was running for President of the United States, a campaign into which he injected $45 million of his own money. As Chris Kelly pondered in the Huffington Post:
Between February 2007 and February 2008, Mitt Romney made a huge financial blunder. He lent Mitt Romney $45 million to run for president. (In July 2008, he wrote a letter to the FEC, informing them that Mitt Romney was "forgiving the outstanding loans" to Mitt Romney and that the loans should be "reclassified as contributions.") Where did successful businessman Mitt Romney get the $45 million to lend politician Mitt Romney, loser and clod? If he got the cash by liquidating stock, he did at least some of it during the Dow's 200-point decline in the winter of 2007/2008.
I'm not saying that's what he did -- and it's impossible to know without his returns -- but if he did, isn't possible that he took a substantial loss?
The move could clear away the last remnants of a divisive primary race, insuring that he and his financial supporters are focused on helping McCain...Still, Romney's investment in his own campaign and the donor network he built may have helped his vice presidential stock go up. The $45 million helped win widespread name recognition for Romney, who also raised more than $65 million from donors. Since McCain clinched the nomination in March, Romney has asked his supporters to contribute to a Republican National Committee fund that will be used to help McCain's candidacy and he has urged his campaign finance team to work for McCain.
For most Americans, volunteering to give up 20 percent of their net worth is simply beyond their ability to imagine. But for Mitt Romney, the loss would have been much bearable if it wiped out his capital gains tax bill owed to Uncle Sam over a period of years. Luckily for Mitt, a friendly tax code and a supportive family make burning through $45 million almost painless. As his son Matt Romney explained in January 2008:
"I don't ever expect to see any of that anyways. I don't think any of us kids are counting on that money. If my dad decides to use the money he's made, than we support him."
As it turns out, if Mitt Romney becomes the 45th President of the United States, Matt, his four brother and their 16 children can expect to see all of their father's millions. With President Romney zeroing out the estate tax, their payday courtesy of all other American taxpayers could reach an estimated $84,000,000.
The least surprising element to Barack Obama's 2012 State of the Union address was the Republican talking point that the President's policies have "made our economy worse." Speaker John Boehner regurgitated that point five times during his pre-buttal on Fox News Sunday before concluding last night that Obama's "policies are making our economy worse." Days after admitting "of course it's getting better," on Tuesday Mitt Romney returned to his uber lie that the President is "making these troubled times last longer." And in his official Republican response, Indiana Governor Mitch Daniels declared President Obama "has held back rather than sped economic recovery" and "cannot claim that the last three years have made things anything but worse."
Sadly for the trickle-down mythmakers of the Republican Party, the facts and the overwhelming consensus of economists - including John McCain's 2008 brain trust - prove otherwise. President Obama not only did not make the American economy worse; he saved it from "Great Depression 2.0."
Start, for example, with the conclusions of the nonpartisan Congressional Budget Office (CBO). Despite Republican mythmaking that the American Recovery and Reinvestment Act (ARRA) "created zero jobs," in November the CBO reported that the stimulus added up to 2.4 million jobs and boosted GDP by as much as 1.9 points in the previous quarter. As The Hill explained, the CBO has found that "President Obama's 2009 stimulus package continues to benefit the struggling economy":
The agency said the measure raised gross domestic product by between 0.3 and 1.9 percent in the third quarter of 2011, which ended Sept. 30. The Commerce Department said Tuesday that GDP in that quarter was only 2 percent total...
By CBO's numbers, the $800 billion stimulus added up to 0.9 million jobs in 2009, 3.3 million jobs in 2010 and 2.6 million jobs in 2011.
Mark Zandi, an adviser to John McCain in 2008, was adamant on positive role of the stimulus. Federal intervention, he and Princeton economist Alan Blinder argued in August 2010, literally saved the United States from a second Great Depression. In "How the Great Recession Was Brought to an End," Blinder and Zandi's models confirmed the impact of the Obama recovery program and concluded that "laissez faire was not an option":
The effects of the fiscal stimulus alone appear very substantial, raising 2010 real GDP by about 3.4%, holding the unemployment rate about 1½ percentage points lower, and adding almost 2.7 million jobs to U.S. payrolls. These estimates of the fiscal impact are broadly consistent with those made by the CBO and the Obama administration.
But their modeling also suggests that the totality of federal efforts to rescue the banking system dating back to the fall of 2008 prevented a catastrophic collapse:
We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0. For example, we estimate that, without the government's response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.
Even Douglas Holtz-Eakin, former head of the CBO and chief economic adviser to John McCain during the 2008 election, acknowledged the impact of the stimulus. Certainly no fan of either Barack Obama or the design of the ARRA, Holtz-Eakin told Ezra Klein that:
"The argument that the stimulus had zero impact and we shouldn't have done it is intellectually dishonest or wrong. If you throw a trillion dollars at the economy it has an impact, and we needed to do something."
Which is exactly right. To better understand why, it's worth taking a second look at just how dire the U.S. economic situation was when Barack Obama took the oath of office. As The Economist and the Washington Post's Ezra Klein detailed, in early 2009 the American economy was not only in much worse shape than almost anyone imagined; it was literally on the brink of collapse. As The Economist explained the run-up to the passage of the $787 billion recovery program:
The White House looked at the economic situation, sized up Congress, and took its shot. Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.
Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.
As Klein points out, it "wasn't until this year that the actual number was revealed" for Q4 2008 by the Bureau of Labor Statistics. As The Economist lamented, the Obama administration was "flying blind" when it made its fateful prediction that unemployment would peak at 8 percent.
Whether the White House should have known the unemployment picture was going to be much, much worse (as Joseph Stiglitz and Jared Bernstein argued) or that the stimulus package itself was too small and too laden with tax breaks (as Paul Krugman warned at the time), there is little question that the American Recovery and Reinvestment Act worked largely as designed. (Unfortunately, the draconian budget-cutting by state and local governments which have already cost 600,000 workers their jobs could rightly be deemed the "anti-stimulus.") As Krugman described the latest report from the Congressional Budget Office in November:
What it tells us is that the US federal government has been practicing destructive fiscal austerity since the middle of 2010 (and that's not even talking about what's happening at the state and local level). Here's the average of CBO's high and low estimates of the impact of the ARRA on the level (not the rate of growth) of GDP by quarter:
And you wonder why the economy isn't recovering strongly?
That's why the extension of the temporary payroll tax cut President Obama argued for so forcefully in the State of the Union address - and which Republicans continue to obstruct - is so essential for the U.S. to expand on its slow but steady job gains. As the Washington Post reported late last year:
Estimates vary on the extent that growth in the gross domestic product could suffer. Goldman Sachs economic forecaster Alec Phillips estimated that allowing the payroll tax cut to expire would reduce growth by as much as two-thirds of a percentage point in early 2012. Macroeconomic Advisers estimates that it would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs by the fourth quarter.
Nevertheless, Governor Mitch Daniels, who as head of the Office of Management Budget falsely claimed that George W. Bush "inherited a recession," suggested last night that President Obama's policies were "pro-poverty" and have "put us on a course to make it radically worse in the years ahead." But before proclaiming that "we do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves," Daniels would have done well to remember George W. Bush's famous words from the 2000 campaign:
"This is an impressive crowd - the haves and the have-mores. Some people call you the elites; I call you my base."
As the record shows, it was President Bush who left the U.S. economy in much worse shape than he found it. And no matter how many times Republicans pretend that Barack Obama "made the economy worse," their lie will not become any more true.
I believe the Federal government has grown out of control, threatening the Rights, Liberties, and Property of the People.
This is being done at the Executive, Legislative, and Judicial level. This is in direct opposition to the Constitution and the Founding Fathers vision for the Federal government.
Because I believe this, today I exercised my right as a Free Citizen, and did not visit the White House. This was not about politics or party, as in my opinion both parties are responsible for the situation we are in as a country. This was about a choice I had to make as an INDIVIDUAL.
This is the only public statement I will be making on this topic. TT
If this kind of anti-government rhetoric sounds vaguely familiar, it should. At best, it resembles a Ron Paul newsletter. But at worst, Tim Thomas took a page from the playbook of the increasingly dangerous Sovereign Citizen movement.
Last May, CBS News provided a look into the evolving anti-government movement:
This is a story about a group of Americans you've likely never heard of: they're called "sovereign citizens." Many don't pay taxes, carry a driver's license or hold a Social Security card. They have little regard for the police or the courts, and some have become violent.
The FBI lists them among the nation's top domestic terror threats.
By some estimates, there are as many as 300,000 sovereign citizens in the U.S. And with the sluggish economy and mortgage mess, their ranks are growing.
Growing, and increasingly dangerous. Just a month ago, David Russell Myrland of the sovereign citizen group called "Assemblies of the Counties" was sentenced for deadly force threats against Washington Gov. Chris Gregoire and King County Prosecuting Attorney Dan Satterberg. Myrland's group also supported jailed Alaska sovereign citizen Francis Schaeffer Cox, who plotted to kill judges and other government officials. In November, another Washington state "sovereign," Kenneth Lemming, was "accused of retaliating against law officers by way of frivolous, multibillion-dollar liens meant to intimidate public officials who've prosecuted or jailed members of the so-called sovereign citizen movement. He is also alleged to have planned to harass the children of U.S. Supreme Court Chief Justice John Roberts."
As father and son Sovereign Citizens Jerry and Joe Kane proved, these are no idle threats. In May 2010, the Kanes murdered two West Memphis police officers during a traffic stop and were themselves later killed in a shootout. Jerry Kane traveled the country with his son delivering seminars on "debt elimination" and what he called "mortgage fraud."
One particularly chilling YouTube clip involves Kane fielding a question about a "rogue" Internal Revenue Service agent: "Violence doesn't solve anything, OK. It's not violence that we're after. The Bible even tells us that if you're going to go and make war against somebody, you have to kill their sheep and their goats and their chickens and their babies and their wives. OK?"
In the YouTube video he said, "You have to kill them all. So what we're after here is not fighting, it's conquering. I don't want to have to kill anybody, but if they keep messing with me, that's what it's going to have to come out. That's what it's going to come down to, is I'm going to have to kill. And if I have to kill one, then I'm not going to be able to stop, I just know it."
As TPM reported last May, sovereign citizens will claim laws large and small simply don't apply to them:
A sovereign citizen in Virginia was arrested and charged with five misdemeanors after a bizarre encounter with a state police officer where he called himself a "free citizen on a free highway" and gave multiple fake names.
Michael Creath Jones, 31, was pulled over last week by State Trooper T.M. Simmons because he had a fake painted license plate with the words "Virginia" and "private use" handwritten on it.
Thus far, there's no evidence to suggest that Tim Thomas, a man who wears the jersey of the United States, is a "sovereign citizen" who believes himself above its laws. But if he feels so strongly about being a "Free Citizen," he might want to return the silver medal he won at the 2010 Winter Olympics in Vancouver. Regardless, for his insult to the President and all Americans, Thomas has no place being on Team USA.
"Where's the beef?" With that sound bite, Walter Mondale deflated the insurgent bid of the "candidate of new ideas" Gary Hart for the 1984 Democratic presidential nomination.* Twenty-eight years later, rising Republican White House hopeful Newt Gingrich may be about to have his own "where's the beef" moment.
But the growing criticism from left and right expressed in articles such as "What are Newt Gingrich's Big Ideas?" do an injustice to the man of self-proclaimed "grandiose thoughts." Newt Gingrich does indeed have one very big idea; it just happens to be an awful one.
Call it "the 2-2-2 Plan."
When it comes to Medicare, Social Security and the tax code, Gingrich is offering voters a choice between the current system and a new one. Of course, whatever you name his big idea, the result is always the same: President Gingrich would deliver yet another massive windfall for the wealthy while draining trillions from the U.S. Treasury.
Gingrich's scheme for a budget-busting payout for the gilded class starts with his tax reform proposal. Like his rival-turned-endorser Rick Perry, taxpayers could choose to pay an optional flat tax rate (15 percent in Newt's case, 20 percent in Perry's proposal). The corporate tax rate would be slashed from 35 percent to 12.5 percent. Like, Perry, Gingrich would completely eliminate the capital gains tax. (As the Washington Post recently explained the impact of the already historically low 15% capital gains tax rate, "Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.") That's why President Gingrich's reforms would slash his own annual tax bill by $540,000, while virtually erasing Mitt Romney's altogether.
Gingrich preserves deductions for corporations and rich individuals that Perry eliminates: He preserve deductions for charitable giving and mortgage interest to all Americans, whereas Perry only keeps them for families earning less than $500,000. Perry vows to eliminate all corporate tax deductions, while Gingrich would preserve them. As such, corporations and the richest Americans could stand to benefit even more under Gingrich's plan than Perry's.
Under Perry's plan, those with more than a million in income would save $500,000 in taxes by 2015, due to a 60 percent drop in their tax rate, and those benefits would be even bigger under Gingrich. According to the Tax Policy Center, Perry's plan would lower total projected government revenue by 27 percent--a $1 trillion loss in 2015 alone. Gingrich's plan, accordingly, would result in even bigger revenue loss.
Roberton Williams of the Tax Policy Center concurred with that assessment, concluding, "You would have about three-quarters of the revenue you would have under Perry, so you have a much bigger revenue hole."
On Social Security, too, a President Gingrich could unleash torrents of red ink for Uncle Sam. As the Wall Street Journal explained, Gingrich is just the latest Republican to call for the privatization of the nation's retirement security program:
Mr. Gingrich wants to let younger workers divert the 6.2% employee half of the Social Security payroll tax into private accounts, much like 401(k)s...The Gingrich accounts would be voluntary, allowing anyone to remain on traditional pay-as-you-go Social Security.
As it turns out, Gingrich's Social Security scheme introduces two threats - one familiar, one new - to the federal government's fiscal health. By allowing younger workers to contribute a portion of their payrolls taxes to private accounts, Gingrich would necessarily rob the Social Security system of trillions needed to pay current beneficiaries. As Matthew Yglesias described the problem for Newt and other would-be Republican reformers:
What privatizers want to say is that current retirees will keep getting benefits and future retirees will be okay despite our lack of benefits because we'll have private accounts. But current retirees can't get benefits if my money is in a private account. And my account can't be funded if I'm paying benefits for current retirees.
But Gingrich's proposal creates a second, more sinister risk for the U.S. budget. Gingrich would, as the Brookings Institution put it bluntly, "privatize gains, socialize losses." ThinkProgress explained that "should private accounts fail to deliver the same return as minimum Social Security benefits, the government would step in and make investors whole again":
The government guarantees that all workers with personal accounts will receive at least as much in retirement as they would under the current Social Security system. If someone with a personal account retires with benefits lower than those offered by the current system, the Treasury will send them a check to make up the difference. Thus, there is a legal government obligation that in a worst case scenario a retiree will be able to enjoy benefits at least as good as they would under the e traditional Social Security system.
Gingrich's scheme may have been inspired in Chile, but the moral hazard it creates in the form of government bailouts for bad investors would be all American.
On Medicare, too, Newt Gingrich wants to offer millions of American seniors a choice. They can stay in the current guaranteed insurance program or, as TPM explained, "purchase private insurance with a voucher":
Under Gingrich's proposal, Medicare won't be just another plan competing with the premium support system that seniors can purchase with a voucher, but a whole separate system in and of itself. If seniors think it's more generous and dependable than the private system, they can stick with it, period, making it tougher to keep costs down but also making it less disruptive for those who are used to the old system.
As the Wall Street Journal pointed out, "Mr. Gingrich's plan is merely a gloss on Medicare Advantage." As it turns out, per beneficiary costs for Medicare haven't only risen 40 percent more slowly than private insurance. As Ezra Klein pointed out in June, history already provides a guide with the private Medicare Advantage option currently chosen by 15 percent of today's beneficiaries
This isn't the first time we've tried to let private insurers into Medicare to work their magic. The Medicare Advantage program, which invited private insurers to offer managed-care options to Medicare beneficiaries, was expected to save money, but it ended up costing about 120 percent of what Medicare costs.
All in all, under Newt Gingrich's 2-2-2 Plan the rich would get much richer and the U.S. Treasury much poorer. That's a very big idea. And a terrible one.
Addressing his disappointed followers Saturday, Mitt Romney took a page out of the Linda Tripp/Christine O'Donnell playbook and announced, in essence, "I'm you." As Politico reported, Romney painted himself as everyman, the living incarnation of your American Dream (starting around the 5:20 mark):
"Our president has divided the nation, engaged in class warfare and attacked the free enterprise system that has made America the economic envy of the world. We cannot defeat that president with a candidate who has joined in that very assault on free enterprise," Romney said.
Calling Gingrich's attacks on his Bain record "a mistake for our party and for our nation," Romney appealed to the hearts of Republican primary voters in his bid to win them back.
"When my opponents attack success and free enterprise, they're not only attacking me, they're attacking every person who dreams of a better future," Romney said. "He's attacking you."
Despite the best efforts of his water-carriers like David Brooks, Ari Fleischer and the Wall Street Journal editorial page, Romney's "I'm you" defense is going to be a very hard sell. After all, voters' obvious disdain for him has less to do with their mythical "envy" over his money and how he made it than their belief that Mitt Romney lives in a different world and simply doesn't care about theirs.
For confirmation, Mitt need only look to his ally and Massachusetts GOP Senator Scott Brown. Brown didn't merely call on Romney to release his tax returns (which he grudgingly announced he will do on Tuesday), but rejected any notion that the former Governor is like "you."
"He's in a category, a lot of those folks are in categories that we don't really understand."
"Don't try and stop the foreclosure process. Let it run its course and hit the bottom, allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up."
It's no wonder Mitt Romney believes income inequality should only be discussed in "quiet rooms" and his tax returns not discussed at all.
Which is why Mitt Romney wasn't doing himself any favors when he brushed off repeated requests to reveal his tax returns:
"I don't put out which tooth paste I use either. It's not that I have something to hide."
But few suspect Mitt Romney has done anything illegal in the hidden tax returns he now admits he will have to release. Instead, most Americans believe those IRS filings will simply confirm that Romney plays by a different set of rules. As Paul Krugman explained:
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.
Or as Jack Blum, a Washington lawyer who is an authority on tax enforcement and offshore banking explained, "His personal finances are a poster child of what's wrong with the American tax system."
That means Mitt Romney is not like you. (As Seinfeld's George Costanza might say, it's not you, it's him.) Instead, his grandiose posturing as the embodiment of an American free-enterprise system supposedly "under assault" makes him more like Animal House's Otter defending his fraternity:
But you can't hold a whole fraternity responsible for the behavior of a few, sick twisted individuals. For if you do, then shouldn't we blame the whole fraternity system? And if the whole fraternity system is guilty, then isn't this an indictment of our educational institutions in general? I put it to you, Greg - isn't this an indictment of our entire American society? Well, you can do whatever you want to us, but we're not going to sit here and listen to you badmouth the United States of America.
Sadly for his water carriers, Mitt Romney's wealth is not the issue for American voters. The scrutiny Romney has denounced as "envy" and "class warfare" is instead a simple plea for empathy and fairness. Voters are looking for a sign - any sign - of empathy from this multimillionaire chronically incapable of understanding the lives and struggles of the people he would serve. But with his ham-handed secrecy, Mitt Romney is only confirming the growing suspicion of Americans told to "work hard and play by the rules" that those rules don't apply to him.
In Thursday's South Carolina debate, Romney turned defensive, declaring, "I'm not going to apologize for being successful." But even Jim Demint, the Tea Party icon and Palmetto State kingmaker who endorsed Romney four years ago, admitted it's not envy fueling voters visceral dislike for the former CEO of Bain Capital. As ABC explained, Demint believes Romney needs to "work on his empathy":
"I know I had to do it a few times in my career and I had sleepless nights and it killed me to do it but I was doing it to save the other employees in my company and keep it going," DeMint said. "If he doesn't explain this well he's going to see this again if he's the nominee in the general election."
"Don't try and stop the foreclosure process. Let it run its course and hit the bottom, allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up."
Few suspect Mitt Romney has done anything illegal in the hidden tax returns he now admits he will have to release. As Paul Krugman explained:
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.
Jack Blum, a Washington lawyer who is an authority on tax enforcement and offshore banking explained, "His personal finances are a poster child of what's wrong with the American tax system." And that's a problem not just for Mitt Romney, but for a Republican Party determined to drain the United States Treasury in order to provide tax cuts for the richest Americans who need them least and that the country can't afford.
As Bill Clinton famously put it, the American Dream can be expressed simply:
"No matter who you are or where you're from, if you work hard and play by the rules, you'll have the freedom and opportunity to pursue your own dreams and leave your kids a country where they can chase theirs."
What can no longer be left unsaid is that the same rules must apply to everybody. Mitt Romney is a living, breathing reminder that they don't.
Which is why Mitt Romney needs to drop his talk of envy, and fast. He doesn't need to repeat Teddy Roosevelt's crusade against "malefactors of great wealth" or FDR's warnings about "the forces of selfishness" and "that Government by organized money is just as dangerous as Government by organized mob." But he might start by emulating his father George Romney, and not just by releasing a dozen years of his tax returns. As Rick Perlstein recalled the Michigan Governor and American Motors magnate:
As a CEO he would give back part of his salary and bonus to the company when he thought they were too high. He offered a pioneering profit-sharing plan to his employees. Most strikingly, asked about the idea that "rugged individualism" was the key to America's success, he snapped back, "It's nothing but a political banner to cover up greed."
At the very least, Mitt Romney should stop comparing President Obama to Marie Antoinette. And the next time Romney finds himself on "the real streets of America," he might try walking a mile in another man's shoes.
In South Carolina yesterday, Gingrich for once passed on an opportunity to take Mitt Romney to task. As ABC reported:
"We can confirm that I paid a 31 percent rate, and although let me be clear, the 21st century Contract With America has an optional 15 percent for every American," Gingrich said at a press availability in South Carolina. "My goal is not to raise Mitt Romney's taxes. It's to let everybody pay Mitt Romney's rate. And so I'm not going to criticize Mitt Romney. I'm going to say, shouldn't we all have the option of a flat tax at the same rate he was paying."
But that's not what Newt has actually proposed. His optional 15 percent flat tax rate is for ordinary income, not capital gains. And it is the capital gains rate which, thanks to the "carried interest" exemption for private equity managers, accounts for the minimal tax bill Mitt Romney pays on the millions he continues to earn each year from his former employer, Bain Capital.
In a nutshell, President Gingrich wants Governor Romney to pay 15 (and not 35) percent on his regular income and nothing on the millions in investment income that makes up most of his cash flow.
Here's how Gingrich's scheme for a budget-busting payout works for denizens of the gilded class like Mitt Romney. Like his former rival turned supporter Rick Perry, taxpayers could choose to pay an optional flat tax rate (15 percent in Newt's case, 20 percent in Perry's proposal). The corporate tax rate would be slashed from 35 percent to 12.5 percent. Like, Perry, Gingrich would eliminate the capital gains tax altogether. (As the Washington Post recently explained the impact of the already historically low 15% capital gains tax rate, "Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.")
But as Suzy Khimm documented in the Washington Post, Gingrich's plan would produce an ever larger payday for the upper class than Rick Perry, while ensuring the U.S. Treasury hemorrhages even more red ink:
Gingrich preserves deductions for corporations and rich individuals that Perry eliminates: He preserve deductions for charitable giving and mortgage interest to all Americans, whereas Perry only keeps them for families earning less than $500,000. Perry vows to eliminate all corporate tax deductions, while Gingrich would preserve them. As such, corporations and the richest Americans could stand to benefit even more under Gingrich's plan than Perry's.
Under Perry's plan, those with more than a million in income would save $500,000 in taxes by 2015, due to a 60 percent drop in their tax rate, and those benefits would be even bigger under Gingrich. According to the Tax Policy Center, Perry's plan would lower total projected government revenue by 27 percent--a $1 trillion loss in 2015 alone. Gingrich's plan, accordingly, would result in even bigger revenue loss.
Roberton Williams of the Tax Policy Center concurred with that assessment, concluding, "You would have about three-quarters of the revenue you would have under Perry, so you have a much bigger revenue hole."
Just how much Romney pays in taxes is, for the moment, a private matter. But his income is public knowledge. In August, Romney disclosed that in 2010 he and his wife made between $1.1 million and $2.8 million in royalties, salary, speaking fees and interest, most of which was likely taxed at a marginal rate of 35%, after accounting for deductions. The Romneys made an additional $5.5 million to $37.3 million from dividends and capital gains, which is generally taxed at a much lower rate of 15%.
At the end of the day, losing the White House to Newt Gingrich will hurt Mitt Romney's ego. But as the numbers show, nothing could be better for his bottom line.
To be sure, Romney hasn't helped his cause by claiming to be part of "the 80 to 90 percent of us" who are middle class, joking "I'm also unemployed" and brushing off $374,000 in speaking fees as "not very much." (That alone puts him in the top one percent of earners nationally.) And no doubt, Mitt added insult to injury three weeks ago when he brushed off requests to let Americans see his tax returns:
"I don't put out which tooth paste I use either. It's not that I have something to hide."
Just how much Romney pays in taxes is, for the moment, a private matter. But his income is public knowledge. In August, Romney disclosed that in 2010 he and his wife made between $1.1 million and $2.8 million in royalties, salary, speaking fees and interest, most of which was likely taxed at a marginal rate of 35%, after accounting for deductions. The Romneys made an additional $5.5 million to $37.3 million from dividends and capital gains, which is generally taxed at a much lower rate of 15%.
In December, the New York Times shed light on that "$5.5 million to $37.3 million from dividends and capital gains" that represents most of Romney's income. Though Mitt left Bain Capital in 1999, 13 years later his windfall continues uninterrupted:
In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain's profits ever since, bringing the Romney family millions of dollars in income each year and bolstering the fortune that has helped finance Mr. Romney's political aspirations...
In the process, Bain continued to buy and restructure companies, potentially leaving Mr. Romney exposed to further criticism that he has grown wealthier over the last decade partly as a result of layoffs. Moreover, much of his income from the arrangement has probably qualified for a lower tax rate than ordinary income under a tax provision favorable to hedge fund and private equity managers, which has become a point of contention in the battle over economic inequality.
In case anyone needs a refresher, there's a tax loophole on "carried interest" -- sometimes called "the carry" -- that taxes private equity and venture capital income at a lower, 15% rate, as compared to 35% on ordinary income. Hedge-fund managers and the Wall Street have fought tooth and nail to protect this loophole -- even after the Obama White House tried to eliminate it -- and so far, they've been successful.
More accurately, it's part of the scandal. With U.S. income inequality at its highest level in 80 years and the total federal tax burden at its lowest in 60, the last thing America needs to do is further reduce the capital gains tax. As a decade of data shows, the Treasury-draining Bush capital gains and dividend tax windfall for the wealthy not only failed to produce employment gains from America's so-called "job creators." As the Washington Post detailed, "capital gains tax rates benefiting wealthy feed [the] growing gap between rich and poor." Nevertheless, most Republicans are calling for a new capital gains tax rate: zero.
As the Post explained, for the very richest Americans the successive capital gains tax cuts from Presidents Clinton (from 28 to 20 percent) and Bush (from 20 to 15 percent) have been "better than any Christmas gift":
While it's true that many middle-class Americans own stocks or bonds, they tend to stash them in tax-sheltered retirement accounts, where the capital gains rate does not apply. By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.
This convenient chart tells the tale:
It's no wonder that between 2001 and 2007- a period during which poverty was rising and average household income had fallen - the 400 richest taxpayers saw their incomes double to an average of $345 million even as their effective tax rate was virtually halved. As the Washington Post noted, "The 400 richest taxpayers in 2008 counted 60 percent of their income in the form of capital gains and 8 percent from salary and wages. The rest of the country reported 5 percent in capital gains and 72 percent in salary."
In Mitt Romney's defense, unlike most of the GOP presidential candidates he has refused to call for the complete elimination of the capital gains tax. (For obvious reasons, Romney has only called for ending capital gains taxes below $200,000.) The political optics would be too horrible even for President Romney. Ironically, if Newt Gingrich were to become America's 45th President, Mitt Romney's tax bill would plummet to nearly zero.
That's not to say that Romney's miniscule tax bill wouldn't shrink further if he became the occupant of the Oval Office. (It would, as Greg Sargent detailed, by half.) After all, as he announced during the South Carolina debate Monday that in 2013, Romney would like the top income tax rate to be 25 percent, and not the currently scheduled 39.6 percent. The $250 million Mitt has also proposed eliminating the estate tax. Compared to the current 35 percent rate on estates larger than $10 million, Mitt's tax plan would give his heirs roughly $84 million courtesy of the U.S. Treasury and all other American taxpayers. Happily for Romney's five sons and 17 grandchildren, that payday dwarfs the $45 million of his own money Mitt burned through during his failed 2008 run for the White House.
Of course, there's nothing illegal about any of that. But in our American democracy, where Mitt Romney's money still comes from, how little tax he pays on it - and why - is simply scandalous.
On January 1, 2013, the top income tax rate is scheduled to return from its current 35 percent to the pre-Bush level of 39.6 percent. Romney had proposed extending the 35 percent rate for the top two percent of taxpayers (including those who like himself are among the richest 3,140 Americans). In comparison, Rick Santorum, Rick Perry and Newt Gingrich have called for slashing gilded-class tax rates to 28, 20 and 15 percent, respectively. But when Fox New host Bret Baier asked the candidates "What is the highest federal income tax any American should have to pay," Mitt apparently panicked that his payday for the upper crust was too small:
ROMNEY: I would like 25 percent, but right now it's at 35, so people better pay what is legally required. But ultimately let's get it down to as low as we possibly can, if it's 20, if it's 25 but paying more than 25 percent, I think, is taking too much out of our pockets.
BAIER: So the highest you had was 35?
ROMNEY: Well, that's what the law is right now, but 25 is where I would like to see us go.
Earlier this month, McClatchy reported that "Romney tax plan would most benefit wealthy." The Center for American Progress explained just how much. While "Romney's plan also gives nearly 60 percent of its benefit to the richest 1 percent of Americans," Mitt's tax cuts for millionaires are "nearly twice the size of those from George W. Bush."
And that was before Mitt Romney's spontaneous outburst Monday that he would really like a top rate of 25 and not 35 percent.
It's worth noting that the $250 Romney has also proposed eliminating the estate tax. Compared to the current 35 percent rate on estates larger than $10 million, Mitt's tax plan would give his heirs roughly $84 million courtesy of the U.S. Treasury and all other American taxpayers. Along with his plans to extend the Bush tax cuts, lower the corporate tax rate repeal some high-income tax increases from the Affordable Care Act, the impact of the national debt would be staggering. As ThinkProgress detailed in September:
Romney's tax plan includes a $6.6 TRILLION giveaway to corporations and the wealthiest Americans. Meanwhile, Romney's Medicaid cuts are even more draconian than the ones in Paul Ryan plan. Both of their plans end also end Medicare, naturally.
So much for Romney's claim that "I want to focus on where the people are hurting the most, and that's the middle class. I'm not worried about rich people. They are doing just fine."
If so, why did Mitt Romney offer the wealthy an impromptu tax cut of a third only on Monday? As he seemed to suggest to the Wall Street Journal last month, the answer is political cowardice:
What about his reform principles? Mr. Romney talks only in general terms. "Moving to a consumption-based system is something which is very attractive to me philosophically, but I've not been able to sufficiently model it out to jump on board a consumption-based tax. A flat tax, a true flat tax is also attractive to me. What I like--I mean, I like the simplification of a flat tax. I also like removing the distortion in our tax code for certain classes of investment. And the advantage of a flat tax is getting rid of some of those distortions"...
Amid such generalities, it's hard not to conclude that the candidate is trying to avoid offering any details that might become a political target. And he all but admits as much. "I happen to also recognize," he says, "that if you go out with a tax proposal which conforms to your philosophy but it hasn't been thoroughly analyzed, vetted, put through models and calculated in detail, that you're gonna get hit by the demagogues in the general election."
The demagogues Romney is afraid of are also known as the American people.
Romney's Big Lie on the Economy Gets Bigger
If nothing else, Mitt Romney seems dedicated to proving that repetition of a lie will make it true. On no point is Romney's tilting against the windmill of truth more comically pathetic than his long-ago debunked claim that President Obama "did not cause this recession, but he made it worse." After a tidal wave of fact-checkers demolished his mythology last summer, Romney on June 30 pretended, "I didn't say that things are worse" before reinstating the falsehood in his stump speech just days later. Now, Mitt has a new twist on his "Obama made it worse" fraud, declaring in light of the improving economic outlook that "It's getting better not because of him, it's in spite of him and what he's done."
Sadly for the myth-maker from Massachusetts, the numbers and the overwhelming consensus of economists - including John McCain's 2008 brain trust - demand Mitt Romney give credit where credit is due.
"The president is going to try and take responsibility for things getting better. You know, it's like the rooster taking responsibility for the sunrise. He didn't do it," Romney said. "In fact, what he did was make things harder for America to get going again."
But back on planet Earth where the force of gravity still applies and the sun rises in the east and sets in the west, Romney's slander shuold receive the ridicule it rightly deserves.
This summer, Time blasted Romney's accusation that "the recession is deeper because of our President," concluding "that Romney's claim has no credible basis" because "there's no credible economic data showing that Obama has inflamed our economic problems." As Greg Sargent noted on June 27, both the AP and the Washington Post's own fact-checker demolished Romney's talking point on the recession which the NBER declared over in June 2009. Confronted three days later by NBC producer Sue Kroll about the growing economy, modest job gains and surging stock market, Romney simply denied he ever made the charge:
"I didn't say that things are worse...What I said was that economy hasn't turned around."
Nevertheless, just four days later Romney marked Independence Day by returning to his lie. As the New York Times reported:
Speaking at the annual July Fourth parade here on Monday, Mr. Romney told a crowd of supporters and passersby, "the recession is deeper because of our president," adding, "it's seen an anemic recovery because of our president."
Mr. Romney made a similar assertion earlier when reporters had pressed him on the point near the parade staging grounds, after initially seeming to limit his commentary to the president's handling of the recovery, which he said, "has been slower and more painful,'' But then he went ahead and said it, that the president "made the recession worse."
As it turns out, it's not just the tidal wave of reporters and fact-checkers that washed away the mud Mitt Romney hurled at President Obama on the economy. A bevy of economists, including ones who worked for Romney endorser John McCain, long ago concluded that Barack Obama saved the U.S. economy from calamity.
Take, for example, the nonpartisan Congressional Budget Office. Despite Republican mythmaking that the American Recovery and Reinvestment Act (ARRA) "created zero jobs," in November the CBO reported that the stimulus added up to 2.4 million jobs and boosted GDP by as much as 1.9 points in the previous quarter. As The Hill explained, the CBO has found that "President Obama's 2009 stimulus package continues to benefit the struggling economy":
The agency said the measure raised gross domestic product by between 0.3 and 1.9 percent in the third quarter of 2011, which ended Sept. 30. The Commerce Department said Tuesday that GDP in that quarter was only 2 percent total...
By CBO's numbers, the $800 billion stimulus added up to 0.9 million jobs in 2009, 3.3 million jobs in 2010 and 2.6 million jobs in 2011.
Mark Zandi, an adviser to John McCain in 2008, was adamant on positive role of the stimulus. Federal intervention, he and Princeton economist Alan Blinder argued in August 2010, literally saved the United States from a second Great Depression. In "How the Great Recession Was Brought to an End," Blinder and Zandi's models confirmed the impact of the Obama recovery program and concluded that "laissez faire was not an option":
The effects of the fiscal stimulus alone appear very substantial, raising 2010 real GDP by about 3.4%, holding the unemployment rate about 1½ percentage points lower, and adding almost 2.7 million jobs to U.S. payrolls. These estimates of the fiscal impact are broadly consistent with those made by the CBO and the Obama administration.
But their modeling also suggests that the totality of federal efforts to rescue the banking system dating back to the fall of 2008 prevented a catastrophic collapse:
We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0. For example, we estimate that, without the government's response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.
Even Douglas Holtz-Eakin, former head of the CBO and chief economic adviser to John McCain during the 2008 election, acknowledged the impact of the stimulus. Certainly no fan of either Barack Obama or the design of the ARRA, Holtz-Eakin told Ezra Klein that:
"The argument that the stimulus had zero impact and we shouldn't have done it is intellectually dishonest or wrong. If you throw a trillion dollars at the economy it has an impact, and we needed to do something."
Of course, Mitt Romney is nothing if not intellectually dishonest. But his lie that President Obama "made the economy worse" has become, as Greg Sargent noted, "absolutely central to his campaign message, yet it's finding its way into story after story and segment after segment with no rebuttal whatsoever." And until that deception is finally buried by the scorn and disdain it deserves, Mitt Romney's "Post-Truth Campaign" will continue until November.
