Mitt Romney has now disclosed that he paid only 14.5 percent of his reported income in federal income taxes in 2010. That’s no surprise. My group, Citizens for Tax Justice, predicted as much last fall, based on Romney’s previous disclosure that almost all of his 2010 income came from capital gains and dividends taxed at the low 15 percent top rate.
Newt Gingrich insists that this is not fair. Touting his own “flat tax” proposal on January 17, Newt said, “I think we ought to rename our flat tax, we have a 15 percent flat tax, so this would be the ‘Mitt Romney flat tax.’ All Americans would pay the rate Mitt Romney paid. I think it’s terrific.”
A fellow from PricewaterhouseCoopers, the big accounting, lobbying, and corporate public relations firm, called me the other day to talk about a PwC project called the “Total Tax Contribution framework,” which he described as “an effort to enhance transparency in corporate tax reporting.” He buttered me up by citing my long history in exposing corporate tax avoidance, and then asked if he and some of his colleagues could sit down with me for an hour or so and talk about the project. To further interest me, he added that the idea had already been tried out in the United Kingdom, and had proven to be very popular there.
For decades, most Republican politicians have treated as an article of faith that tax cuts, especially tax cuts for the rich, will “pay for themselves” through improved economic growth and resulting higher revenues. Critics deride this implausible belief as “voodoo economics” or “the free-lunch theory.” Its adherents prefer to call it “supply-side economics.”
Oddly, the same GOP politicians who think tax cuts augment revenues also fervently hold exactly the opposite position, which they call “starve the beast.” They insist that big tax cuts will so sharply reduce revenues that they will force steep cuts in government programs.
The House and Senate are now negotiating the fifth annual Bush tax cut. How awful it will turn out, remains up in the air.
Last spring, Congress agreed on a budget resolution calling for another $70 billion in tax cuts over the next five years. But then the hurricanes came, the Iraq war raged on, gasoline and heating oil prices zoomed upward, and with continuing huge budget deficits, important public programs were placed on the chopping block.
There are many things to criticize about the recent report from President Bush's Advisory Panel on Federal Tax Reform. Personally, I'm appalled at the report's call for adding $7 trillion more to the deficit over the next two decades -- a catastrophe the panel weirdly styles as “revenue neutral.” If that's not bad enough, the panel's zeal to shift the tax burden even further away from investors and on to wage earners seems wrongheaded in the extreme to me. But while opinions may vary on these issues, one thing's for sure: This program is not tax simplification.