Reid has stated that "a very credible source" told him that Mitt Romney did not pay any federal income taxes for ten years. Supposedy the source called his Senate office offered this tidibt. It is like a little birdie told him. How low can you go?
 |
| Source: Bruce Plante, Tulsa World |
Reid not only made the charge but he also repeated it on the floor of the United States Senate and challenged Romney to prove him wrong by releasing all his tax returns for the last 10 years. In Harry's book I guess you are guilty until proven innocent.
Let's look at what we do know.
The Washington Post gave this statement "Four Pinnochios", their top award for the most outlandish of falsehoods perpetrated by a politician.
Harry Reid has not released his own tax returns.
Harry Reid reported that his net worth was about $1.8 million when he first was elected to the U.S. Senate in 1986. He is now worth approximately $10 million. Not bad for someone on the government payroll.
Harry Reid lives in the Ritz Carlton Hotel in Washington, DC. No apartment or sleeping in his office and taking showers in the Senate gym for Harry.
Harry Reid states that he does not have to release his tax returns even though he wants Mitt Romney to do so because,
"I’m a member of Congress now, I don’t make too much money,”
As Senate Majority Leader Reid makes $193,000 per year.
According to his Financial Disclosure Report, he had another $97,000 to $315,000 in unearned income in 2011.
Mitt Romney has released his 2010 tax return that show that he paid over $3 million in federal income taxes for the year. He also paid almost $900,000 in state and local taxes. In addition, he had charitable contributions of almost $3 million.
Mitt Romney released a draft of his 2011 tax return ( the final return is on extension and not required to be filed until October) that shows an estimated federal tax liability of $3.2 million. He paid an additional $1.5 million in state and local taxes. He also made over $4 million in charitable contributions.
Let's put this in perspective.
Where does Senator Reid think that the money comes from that pays his salary? Mitt Romey paid enough in federal income taxes just in 2010 to pay for Senator Reid's salary in the U.S. Senate for the last 10 years. You can view Romney's tax returns here.
I understand Mitt Romney's refusal to release any more tax return information beyond 2010 and 2011. His 2010 tax return was 203 pages long. Why give Democrats another 2,000 pages of tax information when they already have 400 pages to nitpick about?
The undertone of all of this seems to be that Mitt Romney did something nefarious to not pay his "fair share" somewhere along the line. The implication is that he used tax shelters or tax havens or tax dodges to avoid paying taxes. Of course, all of those would be tax breaks that Congress passed, but that is besides the point. It does not matter what he releases, it will never be enough. He will never be considered to have paid his "fair share" not matter what he has paid.
How does all of this get us from Reid to Romney to Tax Reform?
Looking at this play out, my advice to Governor Romney would be that he has been too cautious on his tax reform proposals. He is perfectly positioned to totally obliterate the Internal Revenue Code if he would take it on. He could also take every trumped up charge the Democrats want to throw at him about his taxes and use it to argue why the Code should be completely overhauled. What better person is there to do it?
A big problem with the current system is that everyone thinks someone else is getting some type of special tax benefit or preference in the Code. That has to change.
A bigger problem is that a main source of federal governmental power is through picking winners and losers through various provisions in the Code. That has to change.
With one fell swoop, Romney could make the case to truly change the way the game is played in Washington. Here's how it could be done.
1. Make all corporations pay tax on their reported book income. Do away with all provisions in the Tax Code where there is a book/tax difference-accelerated depreciation, r&d credits etc. and reduce marginal tax rates correspondingly.
2. Adopt a territorial tax system like the rest of the world. The U.S. taxes all income from whatever source derived and then has to provide a foreign tax credit to prevent taxing the same income twice. This adds a lot of complexity and is a big reason why corporate taxation is so confusing and why we hear that GE or Exxon or Microsoft is not paying their "fair share".
3. Do the same thing for individual taxation. Eliminate all itemized deductions and credits and go to a flat tax with an exemption equal to the poverty limit guideline or some other index that would make sense. This would maintain the progressivity that we are used to but it would not require 203 pages to get there. For 2012 that is about $11,000 for a single individual and 24,000 for a family or 4. That is not high enough? Negotiate that amount with Congress but don't compromise on the basic principle that the federal government is no longer going to favor one group over another (ex. homeowners vs. renters). Henceforth, the tax system would be used to raise revenue and not be an instrument of social policy.
We would put a few tax lawyers and accountants out of work but we would greatly simplify and, more importantly, add significant credibility to the system.
 |
| Source: www.cupcakebusinesscards.com |
What chance is there that this would occur? Probably close to zero for two big reasons.
First, there are just too many voters that are worried about losing their "advantage". On home mortgage interest it is just not homeowners, it is also real estate agents, mortgage lenders and home builders. That is why I think the only way to go down the path of tax reform is to leave no stone unturned and make sure that everyone's ox is gored. It would have to be clear that no one would be left with an "advantage" so there is no reason to fight for their preference. Of course, there are few (if any) politicians who would be willing to put themselves out there on that one.
Second, the reality of the current tax system is that it does not benefit the rich, it primarly benefits the poor and middle class. I wrote about this in The Middle and the Rich. Therefore, any attempts to broaden the base and lower tax rates are always going to be met with arguments that it is an attack on the middle class. Therefore, the irony is that the current tax system is villified by liberals as giving huge tax breaks to the rich but any reform to get rid of the tax breaks is villified by the same liberals as a middle class tax increase. Such is the dirty world of politics.
Due to this fact, I would argue that Romney or someone else would have a better chance of going ALL IN on tax reform rather than the half loaf that is normally peddled when tax reform is discussed. This normally means that home mortgage interest and charitable contributions are untouchable tax breaks. It is just much harder to argue that a tax system that does not provide any breaks to anyone is "unfair" than any other approach to tax reform. If I was defending this reform proposal from these attacks I would just keeping saying, "You are saying it is unfair because we are not providing any tax breaks other than to those with lower incomes? Is that correct?"
The ALL OUT approach also has one other attribute that makes it extraordinarily attractive despite its obvious political risks. It is SIMPLE. People crave simple solutions. There is too much complexity in today's world. There is real power in telling people that they could file their tax return on a post card or through an app on their smart phone. Taking hassles out of people's lives (and dealing with tax returns ranks high on the list of hassles for most) is a real value-add for a politician. We saw this potential in the signficant traction that Herman Cain got from his 9-9-9 Plan during the Republican primary contest.
That is how you could go from Reid to Romney to Reform. It is also a way forward for a man named Rand and other Tea Party legislators if they really want to change Washington.
No comments:
Post a Comment