“A gaffe is when a politician tells the truth — some obvious truth he isn’t supposed to say.” — Michael Kinsley
Mitt Romney really stepped in it this time. His only saving grace is that no one noticed…yet.
In a recent interview with Fortune magazine, Romney indicated that, under his tax plan, “high-income people would continue to pay the same share of the tax burden that they do today.”
This quote doesn’t sound like a gaffe until you put it together with the rest of Romney’s promises. Under his tax plan, those “high-income people” would face much lower tax rates.
This seemed odd to me. The same tax burden with lower rates? Wouldn’t that mean they’d have to earn a heck of a lot more money before taxes?
As it turns out, yes. Yes, they would.
If Romney gets his way, the top 1 percent will pay an average federal tax rate of 22.5 percent, down from the 28.3 percent rate they paid in 2007. The average federal tax rate for the nation as a whole will fall from 19.9 percent to 17.4 percent. (This is assuming Romney doesn’t eliminate a bunch of deductions and credits, in which case most people’s tax rate would actually go up and the number I’m about to report would be worse. I’m giving Romney the benefit of the doubt here.)
In 2007, the top 1 percent paid 26.2 percent of the nation’s taxes. In order to maintain that share of the tax burden, as Romney suggested in his interview, the top 1 percent would have to earn 33.9 percent of the nation’s pretax income.
33.9 percent. One in three dollars of our nation’s output will go into the pockets of the richest 1 percent. To put that into context, in 2007, the top 1 percent pocketed 18.7 percent of pretax income. In 1979, they earned 8.9 percent.
Let’s take Romney at his word. Let’s try to imagine what the world will look like if the top 1 percent earns 33.9 percent of pretax income.
In order to earn that much income, CEO compensation will soar. The financial sector will probably double its share of corporate profits. Leveraged buyouts and other short-term gimmicks will become more prevalent, and many more manufacturing jobs will disappear, replaced by low-wage, no-benefit service jobs — if they’re replaced at all. Wages for the average worker will decline relative to inflation. Most households will have to work more hours just to maintain their standard of living, but even that won’t be enough. Households will sink deeper in debt just to stay afloat. As a result, financial crises will become more frequent and more prolonged. Wall Street will thrive, creating ever more complex financial securities that prey on ever more naïve borrowers.
That’s another thing: Lack of education. Well, you can expect poverty to go up, and therefore students’ test scores will go down. But don’t expect the government to pick up the slack with more funding because the top 1 percent is no friend to high public education spending — or food stamps or Medicaid or pretty much anything that would help poor kids.
And in a world where they’re earning one-third of the nation’s income, the top 1 percent is going to have twice the influence they currently have in Congress. So you can expect plenty of corporate subsidies, especially for Big Oil. Forget about clean energy. We’ll import all that stuff from China. You see, the 1 percent doesn’t like to nurture new industries when they threaten the old monopolies.
Of course, not everyone in the 1 percent thinks or acts the same. They’re a diverse and brilliant and, in many ways, admirable bunch. But 1 percent of the population should not control one-third of the economy, no matter how impressive they may be.
You may think I’m an alarmist. Surely the future won’t be that bad.
Well, guess what: Everything I just described has been happening for the past three decades. And it all happened while the 1 percent doubled its share of pretax income.
Welcome to the future. How do you like it so far?
This op-ed was published in today’s South Florida Sun-Sentinel.