Saturday, August 18, 2012

What does 13% tell us?

Mitt Romney made another attempt yesterday to end the controversy about releasing his income tax returns by declaring that over the past ten years he never paid less than a 13% tax rate. The first problem with that is that it still doesn't answer very many of the questions people have about the tax returns. For example, what techniques did Romney use to reduce his taxable income, or how much in actual dollars did he pay in taxes? (See Ezra Klein's column for a discussion of the "13% of what" problem.)

What is astonishing, however, is the assumption behind Romney's release of this information, that paying 13% is fine and dandy; that our tax system is working wonderfully when it is only collecting 13% of the income of people like him. How far we have come toward accepting a regressive tax system! We are supposed to assume that 13% is a fair percentage for someone of Romney's wealth to pay, even though that percentage is far lower than the percentage paid by millions of people of moderate means. And we're not supposed to see the connection between our large national deficit and the fact that we are asking much less of the wealthiest Americans than we have for decades.

What is even more astonishing, after the admission that he pays only 13% of his (adjusted) income in taxes, is that Romney actually doesn't think that our tax system is working fine. He thinks it is highly unfair. And what is Romney's proposed solution? The centerpiece of Romney's economic plan is a proposal for a sizable tax cut that will largely benefit people in the top brackets. In other words, Romney thinks that the biggest problem with paying 13% in taxes, is that he is paying far too much. I'm searching for words to describe the extent of the cluelessness we are seeing on full display here. Anybody?

6 comments:

  1. << Anyone? >>

    What do myou want? I agree with tax reform.

    So that your readers have something to discuss; specifically, what percentage of income should earners of over one million dollars pay in federal tax?

    Specifically, what do you think is fair for California state tax?

    After these one million or more earners have paid the tax you call for, what percentage should they pay when they invest and realize capital gains?

    What if they lose money on an investment rather than realize capital gains; is that a tax deduction?

    Should interest payments on mortgages be a tax deduction?

    Tell us what you want. What is their fair share? Tell us your view of social justice. Write it out. Once done, readers can agree or discuss.

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  2. I wasn't really looking for a debate on tax reform, just on what words we could use to describe how clueless Mitt Romney is. But if you want to talk about tax policy, my opinion is that my opinion is not important. I'm just one person.

    Are you familiar with the work of John Rawls? You should check him out, because the answer to your questions is that you have to do a kind of Rawlsian experiment, where you get a group of people together who do not know what their own station in life is. Then they have to decide what is fair. In other words, you have to try to answer the question without knowing how the answer might impact you. Say you don't know whether you are going to be poor or rich, but you have to decide how much each group should pay in taxes, imagining yourself in each group.

    I wonder how often a group like that would would think that the person who makes $1 million or more per year should pay 13% of their income in taxes, while the person who makes $50,000 should pay 30%. More often, I think you get pretty broad support for the principle of progressive taxation.

    Funny thing is that Congress is pretty well situated to make these kinds of decisions. But pretty much everyone agrees that Congress has not been doing a very good job of it lately. Why that is could be a whole other discussion.

    As for capital gains taxes, I am pretty familiar with the arguments for taxing them at a lower rate than ordinary income, but none of those reasons ever made sense to me. And you know who agreed with that? Ronald Reagan.

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  3. Your opinion is not important? How are you any less clueless than Romney? Or Congress, or Obama?

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  4. BTW, I have never heard of Rawls; however, the Rawlsian experiment is a good example of how I am influenced on many political and social positions. I like that example. Why are you unable to execute it?

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    1. You asked me what tax rates would be fair. My answer is that tax rates have to be supported and understood by the public. It has to be a group effort. That's why my opinion is not important, or no more important than anyone else's opinion. It's just one opinion.

      That's why I am concerned with process, not policy. I'm not here to tell anyone what tax rates would be. I'm just suggesting that if we can design a fair process, then we will get the right answer.

      The reason Romney is clueless is that he does not accept the principle that to design a fair tax system, you have to take account of everyone's views. He is instead pushing a particular ideological agenda that is only supported by a minority of the public. He never talks about creating a fair political process that respects all points of view. If Romney gets elected, it will be because a bare majority is desperate enough to let him try anything to see if it works. And you can't say the same about the Democratic position. Their suggestions on tax rates are much more in line with a consensus of public opinion. And their suggestions are not radical. They advocate returning tax rates for the wealthiest Americans back to the levels of the Clinton years, when the top tax rate was only 39%. Back in Eisenhower's time, the top tax rate was 90%. Those kinds of historical comparisons will tell you which side is pushing a radical agenda. The Ryan plan is radical because it would eliminate capital gains taxes and corporate taxes and push the top rate down to 25%.

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  5. Thanks for the thoughtful answer. I am surprised you refuse to put numbers in print. I suspect your specific tax ideas would appear so unfair to the majority of Americans that already pay federal income tax (earners like myself that might be tempted to vote a Dem ticket) that you are concerned your specific ideas would frighten them away. That concerns me. I have this feeling that is the way Progressives operate. The motives are never fully above board. I guess the far right could be acused of the same.

    I am in favor of rolling back the Bush tax cuts -- for all. Not just the rich. That is fair and that comes from the Rawlsian test. As someone who earns less than 100,000k annually it would raise my taxes. But it is fair. I see no reason for the wealthy to pay anymore than 39% when someone like myself pays under 30%. Combine 39% with 10% in Cali state taxes and that is 50%. That is a _very_ progressive tax system. To say otherwise is simply untrue. Lets be clear, almost 49% of Americans don't pay federal income taxes.

    We see capital gains tax differently. I think 20% of capital gains is fair. The money used to invest would have been taxed already at 39%.

    Corporate tax should be reduced to 25% to ensure global competitiveness. Loopholes that prevent these rates from being paid should be done away with. GE and big oil need to pay taxes.

    All of these ideas together, would guarantee significant increased tax burden on the rich and massive increases in tax revenue.

    By applying the Rawlsian test, the least 'fair' plan would be to raise rates on the rich only. I can't believe that is being talked about.

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