Tuesday

So I'm going to make some comments today on one of the hot topics on the minds of the political pundits and other interested commentators: Mitt Romney's tax disclosures.  Keep in mind that I don't have much of an opinion about the candidate.  If he were to run against The Big O, he would have my support.  Beyond that, I've grown hugely weary of all the nonsense and look forward to November 7th of this year.

Anyway...

None of the reports today suggest that Romney has done anything "shady" on his returns.  (He does have some "carried-interest" income that is statutorily eligible for the 15% capital gains rate, a concept that has many detractors, but that's a different kettle of fish.)  He has made substantial contributions to the Mormon Church, and to his own private foundation.  He's paid millions in Federal taxes.  My guess is that the searchers will eventually find some "loose ends" that will be considered aggressive tax planning steps. 

My experience is that The Man (or Woman) on The Street's eyes tend to glaze over when you start talking about marginal and progressive tax rates, double taxation, Social Security and Medicare tax rates, investment income versus earned income, and Subchapter S income versus wages.  And for good reason: as a republic, we have constructed our tax system based on a variety of social, political and financial goals such that there are few straight lines of logic in the Theater of the Absurd that we call the Internal Revenue Code.

Most people in the tax-paying population (and I use that term in recognition of the fact that we have in excess of 40% of households not paying income tax), simply want to know, "What's my refund?" when they sit down to complete their return.  (Heck, used car places now advertise that they'll help prospective buyers complete their returns to facilitate the use of the refund to buy a car or truck.)

The sitting President made it clear in his campaign four years ago that "sharing the wealth" was a philosophical premise of his beliefs.  He never disputed the famous exchange caught on tape with Joe the Plumber in Ohio, and his administration has continued the mantra of "shared sacrifice".  He's received high profile endorsements for higher taxes on the wealthy during his tenure from the mega-rich likes of Warren Buffet and Mark Cuban.  (How many times will he in his SOTU address tonight make reference to Buffet's secretary who will be, just coincidentally, sitting alongside the FLOTHUS?  Over/Under bet here at 4KDAYS is 3.)

A taxpayer making millions in income, and paying millions in tax is not sharing the wealth because the actual percentage that he is paying (through legitimate means) is lower than the percentage paid by a wage earner.  People of the Peanut Gallery, read closely:  This is purely Political Pandering and Hyjinx!!! (And at the risk of eye-glazing, there's already a minimum tax out there that gets many of these types of returns to 28% anyway.)  If you eat the rich now, who pays for the next 100 years?

I think that the concept that the POTHUS believes in, and that the media will hammer Romney on, is that these wealthy folks should just pay more tax because they can afford to do so.  Period.  It is an emotional rationale (where's Spock?) that resonates to many people.  And there'll be a big "AMEN" out there from that 40+% not paying tax, the Occupiers, Organized Labor, and the other folks who have drunk the cool aid.

A couple of quotes always come to my mind in these discussions:  1) Loosely attributed to Margaret Thatcher; "The trouble with Socialism is that you eventually run out of other people's money." and, 2) Even more loosely attributed to Charles Barkley; "I ain't never got a job from a poor guy."

My solution, which I may have stated here previously, and which has no chance of being implemented, is to reduce tax rates, eliminate deductions, and tax everyone and everything.  Churches, schools, foundations and all the not-for-profits would have to step up and pay as well.  (Get rid of the tax CPA's and attorneys!)  Fundamentally, you need to broaden the tax base and reduce the future funding of Social Security and Medicare.  The only part of this equation that is rocket science is getting politicians to do their jobs.

In summary, be careful of the conclusions from comparative tax rates and the definition of shared sacrifice.  This might be a routine SOTU speech in other years, but make no mistake about tonight, this is the White House's official launch of the re-election campaign.  It's now and forward all about November 6th.

BCOT