Tuesday, September 18, 2012

Romney's erroneous equation

Romney's 47 percent comment is based on a claim of equivalence between the following 4 groups:

(1) People who paid no federal income tax in a given year,

(2) People who are on the dole, supported by government handouts rather than providing economically for their own needs,

(3) Obama voters, and

(4) People who "refuse to take personal responsibility and care for their lives."

The first is a meaningless statistic.  It doesn't count other federal taxes, other state and local taxes, or other years.  It also is based on treating spending-equivalent provisions in the income tax differently from those that are administered by the federal government outside of the income tax law.

This last is a pretty broad concept, by the way.  Suppose that, in a given year in the late 1990s, Romney had economic income of $100 million, used tax shelters and the carried interest rule and all the rest to pay taxes of $2 million on taxable income of $10 million, and in effect received $3 million of subsidies via the entity-level tax savings from loading up target companies with debt (treated more favorably than equity) plus reneging on pension guarantees that were taken over by the PBGC.  Would that make him a moocher?

Are retirees moochers if they worked all their lives but are now getting Social Security and Medicare?  Are they moochers if the value of their benefits exceeds that of their tax contributions to the programs?  But didn't they work all their lives?  And, anyway, isn't the Romney campaign currently engaged in full-throated denunciation of supposed Medicare cuts?

A further obvious point is that (2) above is not equivalent to (1).  Not paying federal income tax in a given year does not indicate that one is predominantly supported by federal transfers, on either an annual or a lifetime basis.

Likewise, (3) is not equivalent to (1) or (2).  Consider in particular Romney's support among seniors and people in the poorer states.  And consider the negative correlation between income or wealth on the one hand, and voter turnout on the other.  For that matter, what about all the affluent, taxpaying Obama voters?

By the way, my effective tax rate is at least twice as high as Romney's, probably more than that if we could see more years of his tax returns.  Does that make him a 50 percent moocher?

On (4), I will just note that merely having an extremely privileged background, and being so sheltered that you are totally unfamiliar with how millions of Americans live their lives (even after campaigning for most of the last 6 years), is not by itself nearly sufficient to get one to believing what Romney said.  (And again, this is what he said about 47% of the country, not about the exceptional case or the overall incentive strucure in our fiscal system.)  To believe what he said, you also need to have pathologically low empathy and curiosity, and it helps as well if you have uncommonly low intelligence.  (A number of conservative bloggers have noted how stupid, ignorant, sophomoric, and uninformed his comments are.  People like Ryan, Gingrich, and even Santorum, whatever one thinks of them overall, almost invariably sound smarter, more thoughtful, and better-versed.  At some point, the presumptions from his private equity background and his flunkies' encomia to his never-observed brilliance have to give way to the evidence of one's own ears.)

One of my takeaways, among others, is that, contrary to what we sometimes all believe, just because you're rich doesn't mean you're smart.  Plenty of idiots have stumbled into large fortunes.  Borrowing reams of money through target companies so that you can then divert the borrowed funds into your own pocket, leaving others to hold the bag if the target can't bear the carry, doesn't take great intelligence in an era when banks were making billions of dollars worth of foolish loans.  It's like buying real estate in NYC, in the era when property values were shooting through the roof, and then deciding that you must be a genius because your properties appreciated like all the rest.

There, he insulted me, so now I've insulted him.


The New York Crank said...
This comment has been removed by the author.
The New York Crank said...

Let us hope that publicity of Romney's off-the-cuff remarks on moochers is the beginning of his end.

But all the same, never underestimate the willingness of the American public to vote against its own self-interest.

Crankily yours,
The New York Crank

Unknown said...

This last is a pretty broad concept, by the way. Suppose that, in a given year in the late 1990s, Romney had economic income of $100 million, used tax shelters and the carried interest rule and all the rest to pay taxes Matawan Tax Return Service