Unhappy returns - Romney, his taxes and why you keep finding blood in your underwear

I guess we’re never going to see Romney’s actual tax returns, never going to know the truth. We’ll have to take his word that he’s “never paid less than 13 percent in taxes.”  Keep in mind that, for the vast majority of Americans who work for their money – folks who have to show up at a job every day and not just cash in on their investments – the 15 percent tax bracket kicks in at $8,500 a year in income. That’s below the federal poverty level.

So, best case, Romney admits to paying less tax than poor people – not just average people, not middle class people, not even garden variety rich people. We’re not talking Warren Buffet’s secretary here, who I suspect makes a decent wage. We’re talking someone who, if the $8,500 a year is from a full-time job, is pulling down something like $4.00 an hour. That guy? He’s paying taxes at a higher marginal rate than Mitt Romney.

That’s if Romney’s telling the truth. That’s what Romney admits to. I’m pretty sure that, if we got to look at the actual returns, we’d find out that he’s paying that 13 percent on whatever he and his undoubtedly numerous and well-paid tax accountants and lawyers have managed to whittle his “taxable” income down to. We’d find that he’s paying 13 percent on a fraction of what he’s actually raked in. The rest of it is locked away in the various shelters, trusts and the other toys that the very rich routinely use to avoid paying the taxes the rest of us can’t hope to escape. 

In other words, his claim to have “never paid less than 13 percent in taxes” probably falls into the same category of legalistic political semantics as Bill Clinton’s infamous “I never had sexual relations with that woman” claim. Difference being, of course, with Clinton, it was just a question of whether he was fucking an intern. With Romney, the question is whether he’s fucking us.

So what, you might ask. If he’s paying what he legally owes, even if he is gaming the system, why should we care? Well, if, like Warren Buffet, who, I imagine, uses many of the same tools to minimize his tax bill, but who at least admits that the system is unfair and who has come out and said that the rich should be paying more, should be paying their fair share, I wouldn’t give a damn. But that’s not what Romney’s saying.

Romney’s saying he’s paying too much. And that most of the rest of us, the middle class, aren’t paying enough. From the rhetoric on the right, you’d think that we are in the middle of some unprecedented assault on wealth – that upper-income taxpayers are suddenly being asked to pay rates they’ve never been asked to pay before.

Bullshit.

The highest marginal income tax rates are near historic lows. They are half of what they were 35 years ago. They are almost two-thirds lower than they were fifty years ago.

And then there are the capital gains tax rates. These are the rates that affect the rich most directly. These are the rates they pay on the profits from their investments, which, by far, comprise the bulk of the income for most high net worth tax payers. The long-term capital gains rate is at its lowest level ever – 15 percent. Even under Reagan, it was never lower than 20 percent. At the end of his administration, and through the bulk of the first Bush’s administration and the Clinton administration – in other words, during the peak of the strongest economic expansion in US history – that rate was 28 percent, or almost double the current level.

But Romney and the billionaire supporters pouring hundreds of millions into his super PACs say he and his rich friends are paying too much. And that you aren’t paying enough.

An analysis of Romney’s proposed tax reforms – Romney wants to slash marginal rates, eliminate estate taxes, reduce capital gains rates, and then pay for it with the popular dodge of closing unspecified “loopholes” – found that the result of Romney’s plan would be to reduce taxes for the top 10 percent of taxpayers and raise them on almost everybody else. This wasn’t a study from some liberal think tank. It was a study by The Tax Policy Center, which is comprised of leading economists who have served in both republican and democratic administrations. A pretty centrist group.

So Romney thinks 13 percent, even if that’s legal, even if it’s legitimate, that’s too high. Says he’s paying what he owes, but that he owes too much. What Romney’s plan doesn’t address – what no politician’s plan ever seems to address – is how to crack down on the ways that the rich constantly evade the taxes they do owe.

In a 2005, the Tax Justice Network released a study based on data drawn from the Consulting Group; McKinsey; Merrill Lynch/Cap Gemini, and the Bank for International Settlements. The study estimated that, conservatively, wealthy US taxpayers have sheltered about $11.5 trillion of assets offshore. At a conservative rate of return of 7.5 percent, those assets would generate about $860 billion a year of taxable income, with means a consequent loss of tax revenue to the US of $255 billion. A year.  By comparison, 2010 federal spending on Medicare was $290 billion.

Romney says his returns shouldn’t matter. They’re none of your business. That this election should be about the economy, about the deficit. So ask yourself how much healthier the economy would be if Romney had his hyper-wealthy supporters weren’t stealing $255 billion a year from their own country, and then calling themselves patriots.

Politicians’ plans never address this issue because the people that can afford to engage in this kind of tax avoidance are also the kind of people that can poor millions, even tens of millions, in the case of the Koch brothers, maybe even hundreds of millions into the super PACs the politicians need.

The politicians don’t want to bite that hand that feeds them. But it’s the same hand that’s stealing from my pocket, from your pocket.

It’s up to us to decide if that matters. And what we’re going to do about it.