Will Someone PLEASE Tell Mitt Romney to Shut Up?

So 60 Minutes broadcast an interview with Mitt Romney last night.  If anyone wants to know why Mitt Romney is losing the presidential election, I give you the money (no pun intended) quote:

Scott Pelley: Now, you made on your investments, personally, about $20 million last year. And you paid 14 percent in federal taxes. That’s the capital gains rate. Is that fair to the guy who makes $50,000 and paid a higher rate than you did?

Romney: It is a low rate. And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35 percent.

Pelley: So you think it is fair?

Romney: Yeah, I think it’s the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work.

Now,  I know what he’s trying to say.  He’s trying to make the point that income earned by corporations is taxed at two levels, once in the corporation when it’s earned, and once in the hands of shareholders when the corporation’s shares go up in value and are sold or when the profits are distributed out – that every dollar earned, indirectly, by him through his investments, is taxed at both the 35% corporate rate and at the 14% capital gains rate on the balance.  As an empirical proposition, that’s questionable, because arguably it’s corporate employees who bear the burden of higher corporate tax rates (through lower wages) rather than shareholders, but in either case the US tax system badly over-taxes corporate income.

And none of that will matter in the slightest to the guy who just heard Mitt Romney say that he thinks it’s fair that he pays tax at the same rate as Joe Q Sixpack who makes one four-hundredth of what Mitt Romney made last year.  Didn’t it occur to the Romney camp that that’s an obvious question?  Did they not have a better answer prepped for that question.  As if their candidate hasn’t suffered enough outbreaks of verbal diarrhea in the last couple of weeks.

And there was such an easy answer to the question.  Here’s what he should have said:

Scott Pelley: Now, you made on your investments, personally, about $20 million last year. And you paid 14 percent in federal taxes. That’s the capital gains rate. Is that fair to the guy who makes $50,000 and paid a higher rate than you did?

Romney: It is a low rate. And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35 percent.

Pelley: So you think it is fair?

Romney: No, I don’t.  I think it’s a testament to fact that our income tax system is broken and inefficient, and taxes different kinds of income differently.   The end result is that some people pay too much, some too little, all at an enormous cost to the health of our economy.  What I want is a tax system that ensures that a dollar of income is taxed the same no matter how its earned.  

Now, on one level, that’s a generic and gormless answer to a tough question – in short the sort of answer that successful politicians give to hard questions (which is why Obama will beat the shit out of Romney this November).

But you know what?  It wouldn’t have been a bullshit answer.  Quite the contrary, it would have been both a fair and honest answer.  The US tax system is profoundly unfair and inefficient.  Why is Romney’s tax rate so low?  Because corporations are taxed at inefficiently high rates, much of which tax is actually borne by the guy making $50,000 a year (through lower wages), and not the Mitt Romneys of the world.  (Does anyone doubt this?  Ask yourself this, if the corporate tax rate goes up, does the CEO take a pay cut, or do employees get laid off?  Exactly).  Romney’s answer should have been, I’m going to reduce the level of taxation at the corporate level – as he has committed to do – so that corporations can create jobs for Joe Q. Sixpack, and I’m going to increase the tax rate on people like me (which is the obvious corollary of his observation that corporate income is taxed at two levels.  If you’re cutting taxes for corporations, you should increase taxes at the shareholder level – I note that both the Conservative and Liberal governments in Canada have done this over the last decade and no one has so much as noticed).

If Romney (and his Republican fellow-travellers) believe that they’re paying tax at both the corporate and shareholder level, they should have no problem with that proposal – they’d just be taxed at one level, rather than the other.  If they think that would be a tax increase for the Romneys of the world (and, if you believe, as I do, that much of the corporate income tax is borne by reduced employee wages, such that a reduced corporate tax rate would largely benefit workers rather than shareholders) than Joe Q. Sixpack is right to think the current system is unfair, and Romney’s answer to Scott Pelley’s question was, apart from being politically stupid, a damning statement of support for a profoundly unfair system. 

1 thought on “Will Someone PLEASE Tell Mitt Romney to Shut Up?”

  1. I just found this post (sorry, been busy.) Very well written and easy to explain to the economics troglodytes of the world (read: most people.) You must be one of the 47%. haha.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s