Mitt’s Gray Areas
By PAUL KRUGMANPublished: July 8, 2012
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.
1 comment:
If all this stuff gets brought up, the presidential debates should be quite interesting this year. I know I'll be tuning in.
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