[Vision2020] Mitt’s Gray Areas

[Art Deco]

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July 8, 2012
Mitt’s Gray Areas By PAUL KRUGMAN

Once upon a time a rich man named Romney ran for president. He could claim,
with considerable justice, that his wealth was well-earned, that he had in
fact done a lot to create good jobs for American workers. Nonetheless, the
public understandably wanted to know both how he had grown so rich and what
he had done with his wealth; he obliged by releasing extensive information
about his financial history.

But that was 44 years ago. And the contrast between George Romney and his
son Mitt — a contrast both in their business careers and in their
willingness to come clean about their financial affairs — dramatically
illustrates how America has changed.

Right now there’s a lot of buzz about an investigative report in the
magazine Vanity Fair highlighting the “gray areas” in the younger Romney’s
finances. More about that in a minute. First, however, let’s talk about
what it meant to get rich in George Romney’s America, and how it compares
with the situation today.

What did George Romney do for a living? The answer was straightforward: he
ran an auto company, American Motors. And he ran it very well indeed: at a
time when the Big Three were still fixated on big cars and ignoring the
rising tide of imports, Romney shifted to a highly successful focus on
compacts that restored the company’s fortunes, not to mention that it saved
the jobs of many American workers.

It also made him personally rich. We know this because during his run for
president, he released not one, not two, but 12 years’ worth of tax
returns, explaining that any one year might just be a fluke. From those
returns we learn that in his best year, 1960, he made more than $660,000 —
the equivalent, adjusted for inflation, of around $5 million today.

Those returns also reveal that he paid a lot of taxes — 36 percent of his
income in 1960, 37 percent over the whole period. This was in part because,
as one report at the time put it, he “seldom took advantage of loopholes to
escape his tax obligations.” But it was also because taxes on the rich were
much higher in the ’50s and ’60s than they are now. In fact, once you
include the indirect effects of taxes on corporate profits, taxes on the
very rich were about twice current levels.

Now fast-forward to Romney the Younger, who made even more money during his
business career at Bain Capital. Unlike his father, however, Mr. Romney
didn’t get rich by producing things people wanted to buy; he made his
fortune through financial engineering that seems in many cases to have left
workers worse off, and in some cases driven companies into bankruptcy.

And there’s another contrast: George Romney was open and forthcoming about
what he did with his wealth, but Mitt Romney has largely kept his finances
secret. He did, grudgingly, release one year’s tax return plus an estimate
for the next year, showing that he paid a startlingly low tax rate. But as
the Vanity Fair report points out, we’re still very much in the dark about
his investments, some of which seem very mysterious.

Put it this way: Has there ever before been a major presidential candidate
who had a multimillion-dollar Swiss bank account, plus tens of millions
invested in the Cayman Islands, famed as a tax haven?

And then there’s his Individual Retirement Account. I.R.A.’s are supposed
to be a tax-advantaged vehicle for middle-class savers, with annual
contributions limited to a few thousand dollars a year. Yet somehow Mr.
Romney ended up with an account worth between $20 million and $101 million.

There are legitimate ways that could have happened, just as there are
potentially legitimate reasons for parking large sums of money in overseas
tax havens. But we don’t know which if any of those legitimate reasons
apply in Mr. Romney’s case — because he has refused to release any details
about his finances. This refusal to come clean suggests that he and his
advisers believe that voters would be less likely to support him if they
knew the truth about his investments.

And that is precisely why voters have a right to know that truth. Elections
are, after all, in part about the perceived character of the candidates —
and what a man does with his money is surely a major clue to his character.

One more thing: To the extent that Mr. Romney has a coherent policy agenda,
it involves cutting tax rates on the very rich — which are already, as I
said, down by about half since his father’s time. Surely a man advocating
such policies has a special obligation to level with voters about the
extent to which he would personally benefit from the policies he advocates.

Yet obviously that’s something Mr. Romney doesn’t want to do. And unless he
does reveal the truth about his investments, we can only assume that he’s
hiding something seriously damaging.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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