A Flea in the Fur of the Beast

“Death, fire, and burglary make all men equals.” —Dickens

Tag: mitt romney taxes

The Most Depressing Article You’ll Read About Taxes And Rich People (Today)

by evanmcmurry

A must-read from the New York Times on why rich people crying about taxes are full of it:

Most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.

Households earning more than $200,000 benefited from the largest percentage declines in total taxation as a share of income. Middle-income households benefited, too. More than 85 percent of households with earnings above $25,000 paid less in total taxes than comparable households in 1980.

Lower-income households, however, saved little or nothing. Many pay no federal income taxes, but they do pay a range of other levies, like federal payroll taxes, state sales taxes and local property taxes. Only about half of taxpaying households with incomes below $25,000 paid less in 2010.

The uneven decline is a result of two trends. Congress cut federal taxation at every income level over the last 30 years. State and local taxes, meanwhile, increased for most Americans. Those taxes generally take a larger share of income from those who make less, so the increases offset more and more of the federal savings at lower levels of income. [E.A.]

So much for that whole “47% of people pay no taxes” line. Even worse:

Governments still collected the same share of total income in 2010 as in 1980 — 31 cents from every dollar — because people with higher incomes pay taxes at higher rates, and household incomes rose over the last three decades, particularly at the top.

There are now many more millionaires, in other words, paying more than they did in 1980, but they are paying less than they would have if tax laws had remained unchanged. And while they still pay a larger share of income in taxes than the rest of the population, the difference has narrowed significantly. [E.A.]

So the only reason wealthy households are paying what feels like a higher tax rate is because they make so, so much more money compared to when their tax rates were higher that they’re paying a larger amount of taxes even though their rates have gone down; nice problem to have! Of course, in the same period wages for everybody else have stagnated or declined, yet lower income families are paying a higher amount in taxes without making more money.

To sum up, household incomes for the wealthy increased drastically in the past thirty years while their tax rates have decreased considerably; meanwhile, wages for lower income households have gone down, while the amount they paid in taxes went up. And this was the system Mitt Romney wanted to fix to make it fairer for the rich.

If Harry Reid Is A Liar For Speculating About Romneys Tax Returns….

by evanmcmurry

Pierce, as usual, with a great grab. If Harry Reid, is a “dirty liar” for his claim that Romney paid no taxes during the years for which he won’t release tax returns, what does that make Romney-defender Jonathan Karl?

Harry Reid comes to the floor of the Senate and makes this outrageous charge that has absolutely no evidence — I mean, Mitt Romney paid $3.1 million to the IRS in the one tax return that we’ve seen so far. He paid taxes. (Ed. Note: Objection. Relevance. The return Romney has released are not the issue here.) It’s a completely false charge. (Ed. Note: You don’t know that any more than Reid does because we don’t have the returns.) [Emphasis Pierce’s]

Uh…damn right? Karl knows as much as Reid what’s in those returns. Which makes Karl a dirty liar, too. And everybody who’s defending Romney. And everybody who’s accusing him. And everybody in between. Everybody’s speculating until Romney releases his returns. Call me meshuggah, but isn’t that exactly Harry Reid’s point?

Romney’s Tax Plan Is Now The Schrödinger’s Cat Of Policy Proposals

by evanmcmurry

Mitt Romney’s tax plan has officially reached Schrödinger’s cat stage. It simultaneously decreases the deficit and lowers everybody’s taxes—provided, of course, you don’t actually lift the lid and look inside.

So long as the cat is both dead and alive, the Washington Examiner can get away with publishing nonsense like this, attacking Obama’s characterization of Romney’s tax plan as taking from the poor to give to the rich:

[Obama’s] claim is based on a report from the Tax Policy Center, even though the authors — who include one former Obama aide and a former aide to President George H.W. Bush — preface their study by saying, “We do not score Governor Romney’s plan directly, as certain components of his plan are not specified in sufficient detail, nor do we make assumptions regarding what those components might be.”

See? How can Obama criticize Romney’s tax plan when he doesn’t even know what it is, because Romney hasn’t told anybody? It may seem impossible for Romney’s plan to both drop the deficit while cutting taxes across the board by 20%, but until Romney says how he’s going to do that, which he won’t, you can’t be sure it doesn’t, which it can’t—except it might! If Romney doesn’t reveal the details of his plan, its two mutually-exclusive aims don’t actually cancel each other out; death and life coexist within the box.

By the way, how did the Romney campaign respond to that study from the Tax Policy Center last week?

The Romney campaign has emphatically rejected the study on several grounds. First, it claims the paper is “biased” because of the involvement of an economist (Adam Looney) who worked on the staff of Obama’s Council of Economic Advisers…Finally, it says the study admits it is not really examining Romney’s plan.

Ah. So when the study is attacking Romney’s tax plan, it’s written by an Obama crony and based on chimeras. When the exact same study is used to attack Obama’s characterization of Romney’s tax plan, it’s a bipartisan report that acknowledges its own empirical limitations. Somehow the study got in the box with the cat.

Harry Reid Should Make Stuff Up About Romney’s Taxes Until He Releases Them

by evanmcmurry

I can’t be the only person in the world fairly untroubled by Harry Reid’s off-the-cuff (or was it?) claim that Mitt Romney hasn’t paid taxes for past ten years. First, as SEK points out over at Lawyers, Guns & Money, the idea that a claim like Reid’s is beyond the pale went out the window about the time the fourteenth Republican legislator scored points off the birther issue, circa 2010. Guess what? If the GOP can continually cast aspersions about the President’s citizenship without a single bit of evidence to back up the claim, then Harry Reid gets invoke/make up a source to question Mitt Romney’s tax returns. If you don’t like that we live in such a world, I’ve got somebody you should talk to before Harry Reid.

More to the point, this wouldn’t be an issue, not for a single moment, if Mitt Romney released his tax returns, which it’s becoming more and more clear he won’t. If Romney wants to a) run for the highest office in the land, and b) run on his personal history as a money-making individual, then we have every right to demand he release documents testifying to his behavior as that money-making individual, i.e., supporting his claim that he’s qualified to be president. If he doesn’t release the returns, then we have every right to speculate what might be inside of them. Tax evasion? A dinosaur? That copy of the Constitution with the word “suckers” in it? It could be anything. He could have paid a 5% tax rate. He could have paid zero. He could have loss harvested. He could have made a fortune off the economic collapse. He could packaged and resold mortgages.

All Mitt Romney has to do to put an end to such speculation is release his tax returns. As far as I’m concerned, Harry Reid should go out every day and make wild accusations about what’s in those returns until Romney does so.

Addendum: Could Reid potentially be giving Romney an out by making the specter of his returns so bad that when Romney finally releases them, and it turned out he only paid, I dunno, 10%, that actually seems good by comparison? That’s a legitimate worry.

Addendum 2: I’ve heard advanced a theory that this was Romney’s play from the start—to get the Democrats to so freak out about his tax returns that when he finally releases them and they’re no big deal, the Dems look foolish. In which case, good on Romney for playing the long game.

 

“The Math Is Inescapable,” Romney Tax Edition

by evanmcmurry

Remember when Mitt Romney released his tax plan, back in ye olde days of the GOP primary? No? Strange, because Romney had, even at that point, tens of millions of dollars behind him, so one would think that if he wanted you to know about his tax plan, with its regressive, across the board 20% tax cut, you’d know about it. Why would he hide a major policy initiative?

Via Jonathan Chait:

But he still attempted to hide the ball. Romney promised that his rate cut would be matched by closing tax deductions and some unspecified allowance for economic growth, and thus would not decrease the level (or the share) of taxes paid by the rich. Romney’s boast that his plan could not be scored revealed the essential calculation. But the campaign miscalculated. Yesterday’s study by the Brookings Institution and the Tax Policy Center showed that, even allowing for the faster growth predicted by Romney’s own economist, there aren’t enough tax deductions to account for the cost of the lower rates for the rich — raising taxes for the middle class would be the only way to make Romney’s promises add up. Romney didn’t hide the ball well enough.

[…] Romney isn’t offering a policy blueprint for what deductions he would take away, let alone a plausible scenario to pass such a plan even if it did exist. He’s just using the mystical economic pixie dust of the nonexistent corporate tax reform plan in order to hold out the hope of some missing ingredient, some unmeasurable X factor, to keep his proposal in the safe dreamworld where the cruel tyranny of math cannot apply. But the math is inescapable.

I’ll only add that it’s generous to say Romney’s team miscalculated. It’s entirely possible—likely?—that they knew full well the numbers didn’t add up. But Romney and Co. are ideologically committed to lowering taxes on the wealthy, whether such a move is economically or politically advisable or not, so they have to run with the tax plan no matter what the numbers say. (I’ll leave it to the Obama campaign to insinuate that this is not how private industry is run, and thus Mitt Romney’s business experience—his primary selling point—is essentially worthless when it runs up against the brick wall of intractable ideology.)

Romney now has hundreds of millions of dollars behind him, which means he has an exponentially greater ability to inform you about his tax policy, if he wants to do so. He could be running ads in every market touting his proposal to lower taxes by 20%; if Romney so desired, the very sound of his name could be associated with “20% tax cut,” such that his mere ephemeral presence initiates a Pavlovian response in the electorate. So if you don’t see ad after ad after ad for Romney’s tax cut, it means Romney doesn’t want you to know about one of his major economic policies, even as he runs for president on an economic platform. Which means, essentially, that Romney and Co. know their plan doesn’t do any of the things they say it will do besides cutting taxes on the rich—indeed, was probably never intended to do anything but that.

At least he’ll always have foreign policy.

What Romney’s And Obama’s Tax Returns Tell Us About Who They Are (Besides Rich)

by evanmcmurry

Here’s a graph, via Lee Drutman of the Sunlight Foundation, of the incomes and tax rates of recent presidents, dating back to Reagan:

Long graph short:

1) This election is between the two richest candidates in the modern era; none of the previous presidents come close to Obama in income, let alone Romney, who single-handedly extends the income axis of the graph by 400%. If you were so inclined, you could see this election as just one rich man versus another.

2) Romney paid the lowest taxes of any of the presidents; his highest reported rate, 15.4%, is still a tenth of a percentage point lower than the next lowest rate, paid by B41. By contrast, Obama paid far and away the highest tax rate, paying 32.6% in 2009 and 33.7% in 2007. More simply: Obama made 1/4 of what Romney did, but paid double the tax rate. Part of that is due to the nature of the men’s income: Obama’s was straight income, Romney’s was from investments. But Romney also has offshore accounts, etc., designed entirely to avoid paying taxes (tax avoision being the legal version of tax evasion). Obama paid what he owed; Romney paid as little as possible.

If this is an election between two rich men, it’s an election between two very different kinds of rich men.

Romney May Have Used “Loss Harvesting” To Avoid Paying Taxes. What The Crap Is That?

by evanmcmurry

The current theory about why Romney won’t release his tax returns is that he didn’t pay any taxes in 2008 or 2009. Via Ezra Klein:

But Daniel Shaviro, a tax professor at New York University, isn’t so sure [Romney paid taxes]. “I think there’s an excellent chance that [Romney] didn’t pay any taxes in 2008 or 2009,” he says. But to get from a small federal tax liability to no federal tax liability, Romney would have needed to engage in incredibly aggressive tax planning. Shaviro mentions picking loser investments to get some benefits from “loss harvesting,” unusual tax shelters, and a bevy of other stuff that, frankly, I don’t totally understand.

Hold up! “Loss harvesting?” What the crap is that? Here’s the Wall Street Journal:

In the midst of market turmoil, it is easy to forget how generous the U.S. tax code is to investors. Not only is the 15% top rate on long-term capital gains less than half the top 35% rate that wage earners pay on their salary, but the rules also provide a way to use losses to reduce or even wipe out tax on current and future gains—raising overall returns.

Here is the gist: Say Tom bought $10,000 worth of the Acme Fund 14 months ago. He still likes the fund, but now his shares are worth $7,000. If he sells, he can rebuy a similar fund right away and book a $3,000 loss to offset taxes on other gains or even his wages.

If the fund recovers, Tom may owe slightly higher capital-gains tax far down the road. Meanwhile, he has sheltered $3,000 from taxes today at rates as high as 35% and has extra money to invest.

Advisers call such sales “tax-loss harvesting” and recommend them to investors with taxable accounts. (It doesn’t apply in tax-favored retirement accounts.) “Loss harvesting is a terrific benefit,” says Joel Dickson, a tax specialist at Vanguard Group, “and we urge investors to take Uncle Sam up on it.”

To be clear, these are actual losses suffered by the shareholder. But in this case, you sell a stock you already own but that’s lost money, and buy one identical to it; you end up with the same amount of stock, but you’ve written off the losses in the meantime, a tax write-off that can be applied to wages or profits elsewhere. Mike Bloomberg, for instance, used loss harvesting to pay no taxes in 2010, and some are so good at gaming the system that they use the tax credit to buy better stocks, recoup the benefits, and then transfer the remainder to someone in a lower bracket to avoid paying higher taxes on the gains from the better stocks they bought from the tax credit they got from the loss.

Remember, this is the tax code that’s supposed to be so unfair to “job creators” that they can’t create jobs.

There’s nothing illegal, or even that shady, about loss harvesting, but its optics, from its name on down, are terrible, starting with the fact that the rich have so many advantages they can even make money on losing money, and have so gamed the tax code that they can shirk their share coming and going.

What’s most amazing about this is that if Mitt Romney did engage in loss harvesting (we don’t know if he did because he won’t release his tax returns), he did it while gearing up for his 2012 run for president, knowing full well his fiscal behavior would become an issue if he got anywhere close to the White House. A good argument that Romney won’t be able to put country before profit can be made from the fact that he was unable to resist putting profit before his own presidential run.

John McCain Is The Worst Surrogate Of All Time

by evanmcmurry

John McCain has twiceTWICE—wandered away from the Mitt Romney Surrogate Tour, both times with regard to Super PACs—he doesn’t like ’em, they’re buoying Mitt Romney’s campaign. Now, when asked if McCain passed over Romney as a VP candidate in 2008 because of what he saw in the tax returns Romney now won’t release, the Maverick had this to say:

Sen. John McCain (R-AZ) defended Mitt Romney from Democratic speculation that he passed on him as a 2008 running mate after reviewing his tax returns, saying Sarah Palin was simply the better choice at the time.

McCain called the tax claims “outrageous” and “disgraceful” in an interview with Politico Tuesday. He said he chose Palin “because we thought that Sarah Palin was the better candidate.”

Gotcha. So it’s not that Romney has some awful smoking gun in his taxes. It’s that he’s a worse candidate than this person. Sold!

Mitt Romney: I’m Not Releasing My Taxes Because Then People Would Use Them Against Me

by evanmcmurry

Long Romney short: “I’m not releasing my tax returns because then people would use them against me.”

For bonus awkward, here’s a screen shot of NRO’s splash page:

See, that’s not good. When the publication publishing your defense doesn’t buy it even enough to give you the front page for five minutes, it’s time to pack it in.

Double Irish with a Dutch sandwich with a vengeance

by pdxblake

One of the big conservative talking points is that businesses are hoarding their billions overseas instead of creating jobs because it is unfair to tax overseas profits, and if only the US allowed them to not pay US taxes on foreign earnings, they would create so many new jobs.  Nevermind that it is more likely that allowing businesses another “repatriation tax holiday” like the Bush Administration did in 2004 did not lead to a big surge in hiring, and instead just gave businesses the extra incentive to continue to hide their billions overseas until the next time they can bring it back for cheap, and to increase their use of offshore tax havens where they can shift profits (even those actually generated in the US, as the NY Times described in a detailed article about Apple’s Double Irish with a Dutch sandwich)

However, one of Mitt Romney’s policies is to end corporate taxation on foreign income, or translating to wonk, move to a “territorial tax system” where the US only taxes income earned in the US.  He claims this would put the US tax system more in line with other countries that use the territorial system.  However, it is more likely to lead to additional offshoring of jobs, based on the research of Reed College economics professor Kim Clausing who estimates: “In 2008, U.S. multinational firms employed 10 million workers in affiliated firms abroad. Under a pure territorial tax system, the tax incentive to locate jobs in low-tax countries would increase significantly, and I calculate that this would increase employment in low-tax countries by about 800,000 jobs” (emphasis added).  This represents an increase of 8% in foreign employment (who would most likely be replacing US-based workers). The Romney plan also excludes (as far as we can tell) the main feature of most territorial tax systems: taxation of some foreign earnings from low-tax countries to reduce abuse of the system through income shifting.

The argument about whether outsourcing is good or bad will continue and I’m going to skip the argument for now just agree with Jared Bernstein at the non-partisan Center on Budget and Policy Priorities (CBPP) who noted in a blog post today about territorial tax systems: “Here’s my take on the offshoring of jobs: it happens…it’s part of globalization.  But the last thing you’d want to do from a policy perspective is incentivize more of it!” (emphasis in original).

Again, as with most of the policies emanating from the Republican Party, this is a policy that can be turned into a (misleading) bumper sticker to sell it as helping create jobs in the US, but in the end all it will do is benefit mostly large corporations and incentivize them to move jobs overseas.  It will also do more harm to the budget deficit (which Republicans only seem to care about when there is a Democratic president in charge).  Currently, income shifting by corporations costs the US Treasury $90 billion a year according to Clausing and it is hard to see a policy that incentivizes more shifting of jobs and profits to low-tax countries leading to higher tax receipts in the US.