Wednesday, July 18, 2012

Mitt Romney, Class Warfare, and The Rosetta Stone of Taxes

It isn't true that Romney "owes it" to voters to release more tax returns than he has and has said he would. In politics only two things rule: the law (a very forgiving standard) and your image. If Romney doesn't release more than two years of federal tax returns and he wins, ergo, he didn't owe anybody anything. And if he loses it will be difficult to impossible to assess the extent to which opaqueness contributed to defeat.

But Romney has a bigger problem. Emphasis on the word "Big."

Clearly, Romney has calculated that — at this moment in time, anyway — it is better to hold his ground than to give way. This may change, of course, which would present new challenges (is Romney, yet again, cowering to pressure in a very unpresidential way? Is this just another head-spinning flip-flop?). A host of conservative commentators and at least one two elected officials have urged Romney to just do it. The most recent is the National Review, whose editorial, "Release The Returns," leaves nothing to the imagination. (The National Review also believes that Romney should make a full-throated defense of capitalism, including outsourcing, something that would, of course, be political suicide, but perfectly illustrates the box the candidate is in.)

On the other hand, should Romney stick to guns the two-year standard might very well inform his choice for a running mate in an unanticipated way: How awkward would it be for the Veep candidate to have a history of being more transparent than Mitt?

The irony is, of course, that Romney has almost certainly done nothing wrong, as in, he broke no laws. There are what sound like adequate reasons for him to have filed documents with the SEC as chief executive and sole shareholder during the period when he was rotating out, or considering rotating out, of Bain (whichever you choose to believe was going on between 1999 and 2002). It's plausible that this would have taken years given the complexity of his role, his own hard bargaining to make the most of leaving his baby and the precedent of his exit package — Bain's very first — would have on the expectations of other partners who might subsequently leave. And there is certainly enough in the record of Bain during Romney's stewardship to portray him as a soulless capitalist and thus not the kind of nuanced leader the presidency arguably requires. Team Obama doesn't need for Romney to have technically been in charge when outsourcing was going on to support this narrative.

The real problem for Romney isn't the devil in the details he fears will give Obama opposition reseachers a field day. It's the Big Picture. It's not the micro, but the macro. Releasing this data will show exactly how the other half manipulates — and creates — the tax code to benefit themselves. We now have bumper sticker data on Swiss Bank accounts and offshore tax havens, but without the context of previous years the picture is incomplete. This is why when you are audited the IRS looks back three years as a matter of course, six if there is a suspicion of significant underpayment and forever if there is evidence of fraud.

The scandal here isn't that Romney is a scofflaw, but that he doesn't even have to be one to do much better than the 99%. Being taxed at a staggeringly lower rate than the average American isn't a crime (even if that rate is zero), but it is an inconvenient fact that those who enjoy it would like to discuss as little as possible.

The scandal is that the tax code and related laws enable the rich and powerful to shield their wealth in a way that the average American simply cannot. And because Romney is seeking the presidency, he has exposed himself to a tradition of tax-return transparency which would open a very exclusive rope line. Unless Rupert Murdoch and Warren Buffet settle that bet this would be the best lesson in the practical exploitation of the complicated tax code by a rarified person, and why certain provisions that benefit the few are so obscure and well defended.

So this is class warfare, after all. The ruling class of which Romney is a member not only exploits loopholes, but writes them into law and would rather not spotlight the unfairness in particular while it broadly calls for tax reform and simplicity (also code for we pay too much). How Romney has moved his money around to make the best use of tax provision which favor him would be a gold mine to forensic accountants.

There would be silly "GOTCHA" reporting, of course. But silly headlines fade. What won't go away as easily is the deeper narrative of tax unfairness. Romney's tax returns would be a Rosetta Stone explaining the babble that is the US tax code.

Romney's finances are fair game because his key economic proposals would reduce his own tax bill — inoculating himself against the self-interest charge alone would be wise enough. But Romney needs to hold fast for as long as he can because this isn't about envy by the 1%, rather the fear of the 99%.

Releasing his taxes will spark a real debate on tax reform by unmasking the platitudinous battle cries of the right as nothing more than rote stammer to protect their own, not the US economy.

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