Hooray for Harry

With the addition of Paul Ryan to the Republican ticket the Democrats seem initially to be making a mistake in judgment regarding their campaign.  Ryan may energize the far Right or Tea Party crowd, but it’s unlikely he would impact the election anymore than Biden has. More importantly, by redirecting attention to the multitude of Ryan ideological pronouncements they may let an important issue languish, if not die.  That issue is Romney's tax returns, which he is refusing to disclose. 

 Mitt has managed to dodge this criticism throughout his political life and he has apparently felt (to date) that he can do the same with this, his current contest.  If the issue is allowed to linger, especially by the media, Romney may again be able to neutralize it from being a relevant factor. He is hoping that people (and therefore the media) may generally just take it as a given that he will not release them and go on from there.  That would be a shame because this is a substantive issue, not just a source of embarrassment for Mitt.  It is the quantitative reality that the tax treatment of Mitt's wealth is a parallel for the constituency that likely benefits from a Romney administration. That reality is difficult for the average citizen to understand, and therefore it is extremely important that visibility be kept on the issue

Why is Mitt afraid to release the returns?  It's anybody's guess, but let me tell you mine. His fears are pretty practical, and it isn't simply the chagrin he might face from paying low taxes during any particular year. 

The US Tax Code is anything but black and white.  If the complexities of intimate relationships can be 50 shades of gray, the tax code is in triple digits.  The Code itself is thousands of pages alone, but much of how income and asset transfers are taxed has also been determined through thousands of court decisions which have created the US Tax Regulations and tens of thousands of IRS Letter Rulings, all of which are many times the size of the Tax Code. 

The US Tax System is essentially an honor system. Individuals are required to file with the Federal Government as tax law requires, but are allowed individual interpretations if the law is presumed unclear. Their interpretations remain unchanged unless an individual is audited and the taxpayer must defend their interpretation.  That audit must take place within 3 years of the due date of the filed return.  Barring a grossly unjustified interpretation (which might even be criminal), after those 3 years the taxpayer is free and clear. If Romney releases his returns with any time left for the army of Obama tax experts to review them I feel they would undoubtedly find errors and/or aggressive interpretations by Romney which would show he effectively (and possibly illegally) dodged a substantial amount of tax. This is a simple reality for individuals who have significant income earning assets and the means to employ expert and aggressive tax attorneys. It would be devastating to the Romney campaign and possibly a show stopper on the whole contest.

The importance of this disclosure is not simply the means to torpedo Romney’s chances at the White House.  There needs to be a demonstration to the American people just how extraordinarily vast the distance is between the wealthy and “middle class”.  Romney is a living metaphor for this problem that reaches much more deeply than a simple “class” struggle.  Nothing demonstrates this more than the way our tax laws have been weighted.

The absurdity of Romney, Ryan, and the Republicans to embrace the idea that to increase wealth for the super rich will increase jobs would be laughable in Econ 101.  Published statistics and research by scholars such as Edward Wolff of NYU show: the top 1% of households own more than 50% of all assets in America, if you factor out residential housing.  The top 20% own nearly 90%!!  The bottom 40% own about one-half of 1%.  Increasing this concentration will do absolutely nothing for the economy.  Yet, like the morbidly obese, Republicans don’t want to see that stuffing more money in their wide mouths only worsens an already dire situation.  

The primary origin of this so called “Great Recession” was the collapse of the housing market, which was quickly followed by a collapse in commercial real estate. It is also the reason for it lingering over the past 3 years.  Conversely, the great real estate bubble that extended from the late 90s to 2007 is what powered the growth in the US economy.  Why?  It did so because the driver of economic growth, and therefore employment, is a great number of people spending money, put simply. To do that a large segment of the population needs two things; a feeling of financial well being and a reasonable degree of predictability about their future.  Expanded real estate values accomplished both.

To push us in the right direction the Federal Government should force, if necessary, providers to refinance of home mortgages to current interest rates regardless of any other factors, flatten the tax rate of the middle class (not necessarily reducing taxes), increase top income tax brackets, and increase the holding period for long-term capital gains from one year to three years and disallowing long-term losses to offset short term gains (thus increasing short-term gains to be included as ordinary income).  Do you think this could happen with Romney in the White House?  The irony is, of course, by doing these things we would not only increase spending growth, more jobs, and improved budgets, but the rich (interesting) would do better themselves…but expecting Republicans to stop concentrating wealth would be like expecting Homer Simpson to ignore the plate of doughnuts laying on his belly.  By increasing the size of the pie and have most of that increase go to the middle class, everyone wins.

So when Harry Reid makes a wild accusation about Romney’s taxes keeping the issue alive I say hooray for Harry.  If it were me I’d be saying Romney earned income from child sweat shops in Malaysia, donated money to fund Gay Pride Day in Provincetown, MA, or takes child care credits for his six Mormon wives and eighteeen children in Utah – anything to keep the pressure on and the issue alive.  Forget about Ryan…he’s a jerk.