By David Cay Johnston
Sept 6 Together Mitt Romney and Paul Ryan have
put human faces on how the super-rich game the tax system to pay
less, pay later and sometimes not pay at all. Both want to
expand tax favors for the already rich, like themselves.
Their approach favors dynastic wealth with largely tax-free
(Romney) or completely tax-free (Ryan) lifestyles, encouraging
future generations of shiftless inheritors. What we need instead
is a tax system that encourages strivers in competitive markets,
not a perpetual oligarchy.
Romney and Ryan say that lowering tax rates and reducing or
eliminating taxes on capital gains and dividends, while letting
huge fortunes pass untaxed to heirs, will boost economic growth
and mean prosperity for all.
We already tried parts of that, starting with Ronald Reagan
in 1981 and doubling down with George W. Bush in 2001. Empirical
result: Flat to falling incomes for the vast majority, weak job
growth, but skyrocketing incomes for the top one percent of the
top one percent, including Romney.
Romney, shifting the Republican focus away from red ink
budgets, wants to slash income tax rates by 20 percent. Ryan has
called for a 10 percent rate for married couples on the first
$100,000, 25 percent above that. The details of both plans show
they primarily benefit the highest paid and already rich, as
multiple independent examinations have documented.
Romney also wants to greatly increase dynastic wealth by
eliminating the estate tax, which I believe would have a
devastating effect on future economic growth, entrepreneurship
and social stability.
His plan would retain the gift tax, but it is already so
porous that, as Reuters reported in January, the five Romney
sons enjoy tax-free income from a $100 million trust fund on
which no gift taxes were paid. Only about $2 million could have
originally gone into the trust without triggering gift taxes.
SLASHING TAX RATES
Under Romney's plan your economic future would be determined
the same way it was in 18th Century France - primarily by who
you picked as your parents, not by hard work, perseverance and
that illusive element of luck.
Romney also wants to slash middle class spending programs,
but despite issuing a 160-page plan ()
he has not said just what he wants to cut or eliminate, asking
voters to buy a pig in a poke.
Slashing tax rates, keeping the share of income taxes paid
by the top unchanged and increasing military spending without
any additional red ink may win votes from innumerates, but it is
a mathematical impossibility. What is a mathematical certainty
is that Romney would cut taxes on the rich and that everyone
below the top would get a lot less back in services from the
The Romney tax plan is Bush II on steroids. The Paul Ryan
plan is Romney supersized.
Ryan wants to lower Romney's own remarkably low 13.9 percent
2010 federal income tax rate to almost nothing - and it would be
nothing if Romney passed up lecture fees.
That is because Ryan's 2010 "Roadmap for America's Future,"
would make capital gains, dividends and some other capital
income tax-free. In April, 235 of 241 House Republicans voted
for a new Ryan plan cal led "The Path to Prosperity" that
obfuscated on taxes.
Nice deal for the already rich, not so much strivers and the
vast majority who will never be able to live large on capital
flows, taxed or not.
More than $21 million of Romney's 2010 income of $21.6
million would be untaxed under Ryan's 2010 plan.
Ryan now speaks for Romney's version of reduced taxes on
capital, but Ryan's spokesman confirmed that Ryan's goal remains
making dividends, interest and capital gains tax-free for
everyone. If Ryan's plans become law then what little income
Romney earns from speeches and other work could easily be wiped
out through leveraged real estate investments and other tax
favors Congress already bestows on investors.
Ryan poses as a tax-cutter, but his forthright 2010 plan ()
would raise middle class tax burdens by half, as we shall
RICH GET RICHER
Hardly anyone in America knows more about how to avoid taxes
than Edward Kleinbard, who spent decades as a tax lawyer finding
creative ways for clients to defer or escape their obligations.
He has been doing penance by exposing tax perfidies, from 2007
to 2009 as chief of staff for Congress's Joint Committee on
Taxation and since then as a tax law professor at the University
of Southern California.
Kleinbard shows Ryan would turn individual and corporate
income taxes into the equivalent of two large payroll taxes with
the burden falling almost entirely on workers, not owners and
The Roadmap "is a mechanism for redistributing tax burdens
down the income scale," Kleinbard wrote. ()
"Most ordinary Americans would see their tax burdens
increase by around 50 percent," he concluded, "while the most
successful individuals would see reductions in their labor
income tax rates, and elimination of all capital tax burdens -
including the elimination of the gift and estate tax."
Every independent and credible tax expert whose reports I
have read, as well as my own analysis, reaches the same basic
conclusions about the Romney and Ryan vision: lower taxes for
the already rich and highly paid; heavier burdens on the middle
class along with cuts in government services.
The Romney campaign told me it pays no heed to analyses by
the Tax Policy Center(), even though
Romney cited its work when it favored him in the primaries. The
nonpartisan center is led by Donald Marron, a former economic
official in the administration of Republican President George W.
The Romney campaign wrote me that the center's latest
analysis is unfair and incomplete and "it's written by a former
OBAMA staffer (Adam Looney)."
I checked. Turns out Looney, listed last among three
authors, was a Federal Reserve economist detailed to the White
House Council of Economic Advisers because of his technical
expertise. Looney is a technocrat, not a political operative.
Looney told me he has never participated in any political
campaign "and I am not sure I am even registered to vote."
Attacking Looney's, and the Tax Policy Center's, integrity
is a low blow. It is also a way to divert attention from the
merits, or lack thereof, in the Romney and Ryan plans.
And while not intended this way, those plans make the case
for fundamental tax reform that honors the time-tested - and
therefore profoundly conservative - principle of making those
who gain the most from society bear the heaviest burden. Romney
and Ryan would shove that burden onto those with less, a radical
plan by an oligarch and his partner in promoting tax-free living
for the richest Americans.