Mitt Romney’s Tax Returns

It took some comments on the New York Times article about Mitt Romney’s tax returns to bring me out of retirement from posting on this blog. I want to provide brief responses to a few of the comments that capture much of the general sentiment of those commenting on that particular article (I cherry pick comments but I’m only focusing on comments with many other reader “recommendations”).

The current highest reader-rated comment is this: “Anyone who sees nothing wrong with the fact that somebody who makes $20 million/year pays less than 14% in taxes, while someone who makes $40K/year pays over 20% is insane. Do not over-think it. It’s absurd and unjust on its face.”

There are many similar comments. For example: “this MITT guy earns 21mil & pays 15% in taxes [sic]. Joe the knuckle head plumber earns 50K and pays 28% in taxes”

What’s wrong with the comment(s)? First, it’s telling that this is the highest rated comment on the article; that tells you something about NYT readers and their biases (just like this post reveals some of my biases). Second, it never helps your cause to insult those with whom you disagree. Third, someone making $40K is not paying over 20% in income taxes (that’s all we’re talking about here – not other kinds of taxes; that’s all we can talk about because the article is about Mitt Romney’s income tax return). With the current tax code, a single person (I calculated as a single in order to try to increase the potential tax burden the most and to reduce credits or deductions or exemptions) earning $40,000 a year has a pre-deduction and credit federal income tax burden of $6030. Aha! That’s a higher rate than Mitt Romney pays (it’s 15%). However, that is a pre-deduction/credit tax amount. The standard deduction for a single person with no dependents and no other conditions that might change that deduction is $5,950. Using that deduction without any itemization (no other items resulting in a higher deduction), a single person making $40,000 a year would owe $4,106 in federal income taxes (estimated using the IRS estimated tax site). That is a 10.3% effective tax rate, which is lower than Mitt Romney’s. At no point was the tax rate ever over 20%, like that particular commenter stated. Further, it is certainly possible but not likely that my hypothetical $40,000 a year earner would have no other credits or deductions. In reality, most people earning $40,000 a year pay a lower income tax rate than 10% (from a WSJ article: “The average income-tax rate for the middle slice of households—those making between $34,300 and $50,000—was 3.3% for 2007.”;  {that article isn’t that great; if you want a better WSJ article to read, read this one}). There’s not much more to say in response to the comment on the NYT article.

This next comment (also very highly rated) captures what a number of people stated (the context is that Ann Romney paid around $20,000 last year for “domestic help”):

“There is NO WAY that family only spent $20,000 for domestic help. No family making that kind of income pays so little for domestic help unless they are doing something illegal. Just one house-keeper alone should make more than $20,000 if they were to pay her the legally required over-time, etc. Something is very wrong here.”

This comment and the others like it are assuming that those are wages for 4 people working full-time (and even overtime!) during the year (“if they were to pay her the legally required over-time…“) instead of the reasonable assumption that 4 different people were paid to help around the house(s) when needed. Maybe the “domestic help” (commenter’s words, not mine) only worked 1 hour each and each was paid $5000 for that hour. That’s much more likely than 4 people working overtime for a total of $20,000 in a year. The logic of the comment is seriously flawed. Not only that but the Romneys paid Social Security, Medicare, and other taxes on that $20,000 paid as Household Employment Taxes (see page 38 of the tax return).

Another highly rated comment (just a bit of it): “Like many of the wealthy, Romney paid no Medicare taxes.” Also, this one: “According to his 1040 Obama IS working — he has a number greater than $0 on the line for wages. It’s Mitt Romney who isn’t working — his wage line says $0.”

Actually, Mitt Romney earned $500,000 in speaking fees. Those fees are taxed at self-employment rates, which means at least $500,000 of his income was taxed at a high income tax bracket (with probably a lower effective rate due to deductions). It also means he paid Medicare and Social Security taxes (plus whatever else) on $500,000 (or at least paid higher taxes on that portion of his income). The first of those two comments was not only a red herring (it doesn’t have anything to do with income taxes), it was wrong. The second is wrong as well. If you throw out a red herring you might as well bring up the fact that in 2010, Mitt Romney paid $226,000 in real estate taxes. That’s money going to governments. In 2009 the Romneys paid $750,000 in state and local taxes (page 137 of the return). Stating that has as much (or more) relevance to federal income taxes on a tax return as does talking about Medicare taxes.

Another well-liked comment:

“This man is part of the international elite of super wealth, whether Wall Street tycoons, oil Sheiks, South American land holders or Chinese and Indian industrialists…. And then there is the business of Mormonism and giving as much to his religious as the public coffers. Why does our system of law allow a tax deductible contribution of this size – and to the Mormon Council of Elders, a shadowy private equity giant connected to Goldman Sachs (basically a Mormon bank).”

Notice the logical fallacy of guilt by association. Also note the blatant anti-Mormon bigotry full of completely false information (“Mormon Council of Elders, a shadowy private equity giant connected to Goldman Sachs (basically a Mormon bank)”). I’m sorry, but that is a ridiculous statement. The whole comment is an expression of ignorance or even outright deceit.

Another comment: “Will the moderator at the next debate please question Romney whether it’s fair that he pays a far lower ta [sic] rate on his income than many middle class Americans?”

Actually, the effective average tax rate for middle class Americans is 8%. Mitt Romney, even with mainly investment income, is paying nearly double that rate.

Another one: “Romney is the symbol of what is wrong in America today. His vast income derives from the destruction of companies, jobs, benefits and pensions in order to generate fees for Bain.”

Bain invested in around 100 companies during Romney’s time there (and most of the companies were either just starting or on the verge of collapse – they were not generally healthy companies; Bain took on risky investments). Around 80 of those had very positive results with less than 10 mainly negative results (and this is only if you include what happened to companies up to 7 years after Bain’s involvement, which means that some of the negative results came during the 2000-2002 recession). That’s quite a remarkable record given the risky business investments. So much for destroying companies and jobs!

Here’s the comment that brought me out of retirement (and it had a lot of other people recommending it, which is pretty sad): “Mitt Romney pays less in taxes than I do. And probably less than almost all the population. But no worries. We’re good sheep. Nothing to see here. Moving along.”

Let me restate that: “I pay more than $3,000,000 in taxes in a year. Almost all the population pays more than that. We just do what we’re told though.” Is that statement true? I doubt it. What the person meant to write is about tax rates, not taxes. Even so, the statement is still wrong. Mitt Romney’s effective tax rate (again, which is what that individual really meant to write, not just taxes) is higher than 80% of tax-paying Americans’ effective rates (additionally, 47% have no income tax burden). So no, Mitt Romney does not pay “less than almost all the population.” Mitt Romney pays much more.

Okay, one last one: “Oh, I get it. You made the money all by yourself. And who paid for the police so you wouldn’t be robbed? And who paid for the transportation system that allowed your goods to flow to and from your place of business.”

Actually, Mitt Romney paid a lot of that. He paid over $700,000 in local and state taxes, including a lot of property taxes. Those go to support the police and the transportation system. He pays sales tax. In any case, we all talk about how we do our jobs or “I earned this” or “I did that”; that doesn’t mean we necessarily ignore the contributions of others.

What we can learn from many of these comments is that there is room for improvement in the critical thinking department. We all could improve in that department; I know I certainly can! But what happens is that some people let their hatred or intense dislike of others cloud their judgments. We allow our biases and assumptions interfere with logical, critical thinking. All people do it to one extent or another. I’m not arguing that we all need to be coldly logical all the time but we could certainly use a boost in critical thinking skills and stop spreading falsehoods.

We Elected the Wrong President

We elected the wrong president. What is almost as bad is that Republicans nominated the wrong person to run against Pres. Obama. What led to our electing the wrong president?

After eight years of Pres. Bush, the country was fed up with Republicans, the economy (although we had some really good years during Pres. Bush’s presidency), and the wars. Not all of us were fed up with Pres. Bush but most people were. Of course, many people never gave him a chance or the benefit of the doubt because of the controversies Democrats created over the 2000 election. I was not a fan of Pres. Bush’s fiscal policies in general but the treatment of him by much of the media and many liberals was inexcusable. The media should be able to and should criticize presidents but the relentless barrage on Pres. Bush and his administration was almost without precedent and bordered on unethical. Pres. Bush also had the misfortune to have his tenure come during the maturation of the internet and rise of social media. The vitriol exploded and the administration did not know how to deal with it (or did not want to waste time dealing with it, unlike the present administration). Part of it was the fact that Pres. Bush was not a “good politician” (that’s not a criticism); he was successful in politics but was not a politician like Pres. Clinton or Pres. Obama. After eight years, our country wanted change.

This is where Pres. Obama came in. In 2006 Congress changed from a Republican majority to a Democrat majority. This was the beginning of the overall governmental change. For a time Sen. Clinton had the lead in the Democrat race for nomination. She had years of experience in Washington and had many connections. However, she was a “Clinton” and had her own history of scandals as well as those of her husband. She did not stand a chance once the media got behind and helped create the juggernaut that was Obama. He was young, cool, polished, intelligent, and media-savvy. As a community organizer he knew how to set up grassroots campaigns and raise funds in small amounts from many people. He was also African-American, which rather than hurting him, helped him tremendously. He had the African-American vote locked up and sealed. Overall, African-Americans compose about 13% of the U.S. population. Obama had virtually all of the African-American vote. Pres. Obama, smartly, ran his campaign on the promise of “Change you can believe in!” He was the person ostensibly from outside Washington who would re-create Washington, giving it an extreme makeover and more metrosexual appeal. Obama was to be a new JFK with the beautiful wife, cute kids, and polished rhetoric. Maybe he could build Camelot anew within the marbled pillars of the White House. He, to some of his followers, is a savior who not only cures cancer with a sympathetic look but also plays a decent game of basketball and looks good without a shirt on. Obama received the Democrat nomination also in part because the economy became of larger concern than the War Against Terror and the war in Iraq at a pivotal moment last year. Sen. Clinton suffered because of this and Sen. Obama benefited.

A similar thing happened in the Republican primary, although for different reasons. Mitt Romney was running 2nd to John McCain but in reality the race was close. However, Mike Huckabee proved to be more than a stinging gnat for Mitt Romney. Mike Huckabee pulled many of Christian conservatives away from Romney because they, in part, were already reticent about supporting a Mormon. Mormons, according to many Evangelicals, are the worst kind of cult; the worst thing to happen to Christianity since the feeding of early Christians to lions by the Romans. Mormons had the audacity to believe in and practice plural marriages in the 1800s, a practice many Westerners just cannot seem to stomach. Of course, Evangelicals do not seem to remember that many of their Biblical prophets practiced polygamy as has most of the world throughout most of history. In any case, Mormons are not well-liked among many fundamental Christian groups (or most other religions for that matter). Romney, in addition to losing supporters to Huckabee, also had the misfortune of the war in Iraq becoming the major issue within the Republican Party for a short while. The main focus on the economy did not come until after Romney withdrew and really not until after McCain was nominated. The war was McCain’s strong point while the economy was (and is) Romney’s.

More than a year ago I stated that Mitt Romney is “the man for the economic crisis in America.” We did not realize at the time how bad the economy really was becoming. That was unfortunate. Had the economy remained the major issue, Mitt Romney would have received the Republican nomination. He has proven business acumen, rescuing troubled businesses over and over (including the 2002 Salt Lake City Olympics). While experience can sometimes be over-rated, Mitt Romney’s economic experience is not over-rated and cannot be over-stated. He would have been a president who would not have to rely completely on advisers to understand and establish economic policies. He could have worked even with a Democrat-controlled Congress, just as he did as governor of Massachusetts, to get sound fiscal policies passed (although the Legislature in Massachusetts did not like many of Romney’s fiscal policies, which were too conservative for them).

Instead of Romney we are left with a spend-happy Pres. Obama and a Congress that is even more spend-happy. The stimulus and bailout packages might help in the short-term, should the money actually ever be released, but they set a precedent for future spending and debt. We purchase short-term and ephemeral gains at the expense of the livelihood of our children and their children. Even with the so-called stimulus package, we face unemployment rates that rival Europe’s (at least Europe’s in a good economic climate). As many European nations move away from socialist economic policy, America moves towards it. Even China has largely moved away from a socialist economy. We should let the market run itself without too much government intervention. I’m not idealistic enough to believe that a purely capitalist nation without government intervention is the best way but less governmental intervention and meddling is usually better.

While I think Pres. Obama is a good person trying the best he knows how to do, I do not believe he is the right person for the job. We elected the wrong person. Instead of Obama, we should have elected Mitt Romney. Fortunately we might have that opportunity in 2012. My only worry is that the economy will have recovered by then and many of us will believe that just because the symptoms are gone, the illness is gone. However, just like antibiotics, we need to extend the treatment long after the symptoms are gone in order to get rid of the disease. I believe that Obama’s fiscal policies contribute to the disease instead of curing it. Maybe Obama can cure cancer but he cannot fix the economy; Congress cannot fix it either. Only the economy can fix the economy. Governments can help the economy but they cannot repair it; they can, however, make it worse by meddling. Again, this does not mean governments should leave economies completely untouched but our government should worry first about plugging the gaping holes in its bank accounts before it tries to do anything with the broader economy. We need fiscal responsibility, not this wanton spending our government is doing.

Mitt Romney was ready to answer the call to service but we rejected him. Hopefully we will not make the same mistake again in 2012 when we will need him more than ever to help clean up the mess the current administration and Congress are making.

Mitt Offers His Sage Advice

Once again, Mitt Romney, a successful businessman and former governor of Massachusetts, offers his insightful advice about how to best stimulate the economy. His theory toward economic policies is much more Smithian than Keynesian. His tagline is Stimulate the Economy, Not the Government.

Quoting the CNN article: “In the final analysis, we know that only the private sector — entrepreneurs and businesses large and small — can create the millions of jobs our country needs. The invisible hand of the market always moves faster and better than the heavy hand of government” (emphasis added).

Lastly, in a letter to supporters he stated, “This is a time of hardship and uncertainty for millions of Americans. Unfortunately, the new President and the Democratic Congressional majority seem more concerned with stimulating the government than stimulating the economy.”

We need to stimulate the economy by freeing up more money from the clutches of our inefficient government. Our government needs to gain inspiration from Smith and Friedman (as far as arguing for smaller government), not Eva Perón’s welfare program or her husband Juan’s economic policies that led to the downfall of the Argentinian economy (please read the comments to this post for more about Argentinian economics).

“Let Detroit Go Bankrupt” – NYTimes.com

Op-Ed Contributor – Let Detroit Go Bankrupt – NYTimes.com.

This article by Mitt Romney was published back in mid November. He provides his perspective on the “Big 3” bailout. As a very successful businessman, his opinion is worth something.

I’ll post a few good quotes from the article.

“Detroit needs a turnaround, not a check.”

“Retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers. That extra burden is estimated to be more than $2,000 per car.”

“Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th.”

“Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation.”

“Starving research and development is like eating the seed corn.”

“I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today.”

Why McCain Should Not Pick Romney as VP

I really hope that John McCain does not pick Mitt Romney as his VP. I have to qualify this statement by saying that I think Romney was by far the best candidate for president – I’d love to see him as president or as vice president but I hope he is not McCain’s choice. Let me explain.

Mitt Romney is a good person. He is a member of The Church of Jesus Christ of Latter-day Saints (Mormons) and lives his religion. He has a great family, so I hear, and has done great things for many people and businesses. He’s been hugely successful in the business world and even managed to get elected as a Republican governor in Massachusetts, not an easy task. During campaigning many people accused him of being a “flip-flopper” on issues. Yes, he changed position on some issues but he wasn’t a “flip-flopper”. This undeserved stigma will be hard to lose. It would be hard for me to watch the media crucify Romney because he would not deserve it. Of course he has his faults but they are not generally what the media says are his faults.

As a Mormon, there is a significant portion of the Republican (and Democratic) Party that will not vote for him. For them, having a Mormon in the White House is like being condemned to Hell for eternity. I wish I was joking. While this bigotry hopefully decreases over time, it’s still a significant factor. This anti-Mormon portion of the Republican Party is large enough that they could seriously impact McCain’s chance for election should McCain choose Romney as his VP. They already are not very trustful of McCain as it is.

I also would like Romney to run for president in 2012 and/or 2016. If he was McCain’s VP and McCain was elected, that would mean that we would have had 12 to 16 years of Republican presidents (and by the time Romney’s term(s) was over it would have been 16 to 20 years), which might be more than the country would think it could handle. We usually like to alternate between Republican and Democratic presidents with some frequency. This is actually also one reason why I think it might be good for Obama to win. Maybe after 4-8 years of his presidency our country would be ready for another Republican (or an Independent).

Of course, it is possible that as VP, Romney’s chances for the presidency would increase because people would see that Mormons are fairly normal and get more used to the idea of a Mormon in the White House. While I’d love it if Romney was picked the VP, I’m not sure if it would be the best thing for Romney’s chances for the Presidency in the future.

Mitt Romney Endorses McCain

In a move that shows both political awareness and good character, Mitt Romney will endorse John McCain for president. Many might question his motives – is he seeking for nomination as a running mate? Maybe. Is he trying to consolidate the Republicans in order to muster the strength to beat the Democrats? Yes. Is he reaching out to McCain to build bridges that were torched during a sometimes acerbic campaign? Yes. Again, Romney is showing that he can put the interests of the country and party ahead of his own ambitions. Some may argue that putting a “liberal” like John McCain in office is not helping the country. However, Romney realizes that “liberal” McCain is more than a stone throw conservative than either Democratic candidate.

I am always amazed at how good Mitt Romney is (good as in a honest person with good character and values). I shouldn’t be amazed but in the context of general American politics, it’s easy to become jaded about politicians. Romney isn’t a politician though. He was a governor and tried to get into politics in the 1990s but he’s a businessman, a family man, and a conservative who happens to have held political office. Romney’s endorsement will seal the nomination for McCain (even though McCain will still be a few delegates shy of the total needed, assuming all of Romney’s delegates decide to support McCain).

Mitt Romney Suspends Campaign!

In a blow to conservatives across the nation, Mitt Romney has decided to suspend his campaign. By suspending his campaign the states get to control how the delegates are used. Romney’s campaign was the most inspiring conservative campaign since Reagan’s 1980 campaign. He just had to fight against too many character attacks by his opponents (Romney may have started the “negative campaigning” but his attacks were always over policies, not personal characteristic or character). He also faced great latent Anti-Mormon sentiments (and overt attacks).

The one consolation is that Mitt Romney is in a very good position for a nomination in 4 or 8 years. I don’t know why Mike Huckabee is still in the race (not that Romney is out, he’s just not really in anymore). He had fewer delegates than Romney and much narrower appeal.

In his official announcement Romney called for unity while appearing selfless: “If this were only about me, I’d go on. But it’s never been only about me. I entered this race because I love America, and because I love America, in this time of war I feel I have to now stand aside for our party and for our country.” That is character. Romney knows when to put the needs of his party ahead of his own aspirations. He said it is time for the Republicans to unite and go forward. He feels that either Democratic candidate, if elected, would not fight the War on Terror as effectively as McCain. It’s not a battle we can afford to lose.

I would be surprised and very disappointed if Huckabee did not suspend his campaign or drop out shortly.

Mitt Romney: The Man for the Economic Crisis in America

I normally take a very positive view of the economy; I’m optimistic about the future. However, there are a number of disturbing signs that point to the serious faults in our economy. One problem is the fiscal irresponsibility of many Americans. I do not blame the banking industry completely, although the relative ease at which credit is obtained is problematic. The fault lies with us as consumers. We live in a disposable society, one where cell phones are replaced almost yearly, food containers are largely disposable, food is fast, and people always desire more. The impulsive and uninhibited spending is correlated with impulsive and uninhibited eating our country seems to suffer from. How can people control their spending if they cannot control their eating? Granted, some people have biological or psychological issues that lead to impulsive eating and spending, but that is relatively rare compared to the overwhelming problem our country has with obesity. The fiscal irresponsibility in our country is manifest in the recent sub-prime lending fiasco that is still shaking up the economy (it is one of the major contributers to the flailing stock markets). The fiscal irresponsibility in our country also is manifest in the high bankruptcy rates. I am generalizing of course. There are people who have financial difficulties without any irresponsibility but they are often a minority of cases.

How can we expect our politicians to run the government in a fiscally-sound manner if we can’t run our own homes that way? I’m not implying that we all need to roll in riches but there is a definite problem with too many people living outside their means, which problem is reflected by the federal government. The question now with our tenuously-perched economy is who is the best presidential candidate to help strengthen the economy?

While there are fiscally conservative Democrats and fiscally liberal Republicans as well as fiscally-responsible and irresponsible Democrats and Republicans, the Republican Party has traditionally been the party of good fiscal conservatism and responsibility. The distinction between Republicans and Democrats has become blurred recently with many Republicans becoming fiscally liberal and supporters of “big government” (which actually is a “return to their roots” per se. The early Republicans grew out of the old Federalists, in part, who were for a strong central government compared to the old Democratic Party of Jefferson, which was in favor of states’ rights and small federal government. This is, however, a discussion for another time). Of note though is that just because someone favors “big government” does not mean that they are fiscally-irresponsible. Continue reading “Mitt Romney: The Man for the Economic Crisis in America”