The World That Mitt Romney Wants to Build…for the One Percent

“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 jobsif 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 na├»ve 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 spendingor 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.

You Haven’t Heard the Last of the Buffett Rule

A battle is coming. A battle for America’s future. A battle for her soul.

The opening salvo came earlier this week when the Buffett Rule died in the Senate at the hands of a corrupt minority who refused to even let it come to a vote.

The Buffett Rule was advertised as a minimum tax rate of 30 percent for households earning more than $1 million a year, but that’s not quite right. The minimum rate actually started much lower for those earning $1 million and gradually increased to 30 percent for those earning at least $2 million.

The Buffett Rule would have raised $16 billion per year over the next decade — a measly 1.2 percent of this year’s budget deficit.

Thus it was not a solution. It was a shot across the bow, a warm up for the decision we will face in November, a test run for the expiration of the Bush tax cuts in December. It was the beginning of a battle to reclaim this country as a democracy for the 100 percent, rather than a plutocracy for the 1 percent. A beginning, not an end.

For if there’s one thing the government desperately needs, it’s tax revenue.

Relative to the size of the economy, the federal government is collecting less tax revenue than it has since the Great Depression, less than any of the other wealthy “G-7” countries, and way below the average for so-called industrialized countries.

The average family of four is paying less of its income in taxes than at any time from 1955 to 2006. The richest 1 percent have seen their average tax rates fall even farther, from 58 percent in the 1950s, to 35 percent in the 1970s, to 29 percent in the 1990s, to 23 percent today. Corporations, which are supposed to pay a top statutory tax rate of 35 percent, actually pay only 12.1 percent of their profits in taxes, the lowest since 1972.

Any way you measure it, taxes are low. (And, let’s not forget, the economy performed better when they were higher.)

So it should not come as a surprise that the federal government will only receive $2.5 trillion in tax revenue to pay for $3.8 trillion in spending this year, leaving a deficit of $1.3 trillion.

If this is a major problem — and the majority of politicians on both sides of the aisle agree that it is — then, as a matter of simple arithmetic, we must raise taxes or face draconian spending cuts. Since Republicans are so insistent on cutting taxes and thus increasing the deficit, they have chosen the latter course of action.

A couple weeks ago, I pointed out that it was unfair, unwise, and unusually cruel to force this kind of pain on low-income Americans, who would bear 62 percent of the burden under Paul Ryan’s latest budget proposal. Several readers replied that it’s unfortunate but necessary.

Is it necessary to slash taxes drastically for the rich? Is it necessary to leave the capital gains exemption intact? Is it necessary to increase defense spending? Is it necessary to foist hundreds of billions of dollars of subsidies on American corporations and the richest 1 percent?

None of these things are necessary. In fact, they are all counterproductive and quite dangerous if it is necessary to reduce the budget deficit. Yet we can find them all in the House Republicans’ budget.

What we don’t find in that budget is more tax revenue.

It is a mathematical fact that we can reduce the budget deficit by hundreds of billions of dollars simply by returning to the tax code that we used to have two or three decades ago — when, by the way, the economy was growing faster, wages were rising faster, and income inequality was lower.

It is also a mathematical fact that the top 1 percent captured 93 percent of the income gains in 2010. The recession has done all that the recession can do. The plutocracy is back.

It is up to us to wrest control of this country back from the grips of concentrated wealth and corruption. It will take time. It will take guts. But mark my words: The Buffett Rule will be back. And next time, it will be a heck of a lot bigger than $16 billion.

==========

This op-ed was published in today’s South Florida Sun-Sentinel.