Suddenly pertinent fact: When George Romney, Mitt’s father, was chairman and CEO of American Motors, he voluntarily turned down $268,000 in pay over five years, which represented about 20 percent of his earnings over that period. “In 1960, for example,” David Leonhardt reported in a 2007 New York Times article, “he refused a $100,000 bonus. Mr. Romney had previously told the company’s board that no executive needed to make more than $225,000 (about $1.4 million in today’s dollars), a spokesman for American Motors explained at the time, and the bonus would have put him above that threshold.”
George Romney, in other words, exemplified a lost species of American business leader: He led in an era when CEOs and boards of directors felt some sense of restraint when it came to compensation. These men (they were all men) lived very well, but they also acted as though there were some relationship between the sums they were paid and broader social cohesion.
On Tuesday, Mitt Romney confirmed that he exemplifies a new breed of business leader. Romney said his effective federal tax rate is about 15 percent, lower than the rate paid by millions of middle-class families. We’ll learn more details soon enough, but it’s a safe bet that a chunk of his income comes via payouts from Bain Capital that are inexplicably treated as capital gains, not as ordinary income.
If Romney were not running for president, his taxes would obviously be his own business. He’d be just a citizen seeking to minimize his tax liability under the law, as all of us do. But because Romney is running for president, and thus proposing specific plans for the nation’s future taxes and spending, his status as a beneficiary and defender of the carried interest loophole (and perhaps others) offers a window into his public values.
Here’s what a senior partner at a private equity firm told me last year about the tax treatment of “carried interest.” “Of course it should be taxed as ordinary income,” he said. “I’m amazed we’ve been able to have this as long as we have. It’s been a wonderful gift all these years, but all of us know it’s going to go away one day.”
I wouldn’t say such sentiments make this investor a statesman. But it does make him different from Mitt Romney.
Romney defends the carried interest loophole that lets private-equity executives pay lower tax rates than millions of everyday Americans do.
Romney’s top fiscal priority is to extend the Bush tax cuts for the highest-earning Americans and to eliminate the estate tax on top of that.
This means Romney believes the best-off Americans should be completely exempt from participating in the wrenching burden other Americans will need to help shoulder (via taxes and spending cuts) to get the country’s fiscal house in order and to fund the baby boomers’ retirement.
Completely exempt! What would George Romney say about that?
And Romney presumably won’t offer a word about Wall Street leaders who’ve gone back to paying themselves $20 million to $30 million a year running firms that were saved from oblivion by taxpayers (who thus saved these executives’ entire net worths as well).
As the campaign unfolds we’ll hear the familiar arguments.
“Top earners already pay the lion’s share of income taxes.” (Yes, because they have the lion’s share of America’s income).
“You could confiscate it all and you wouldn’t come close to balancing the budget.” (Yes, but no one’s taking about confiscation, and just because something doesn’t solve the whole problem doesn’t mean the best-off can’t be part of the solution).
It was ever thus. In the 1820s, John Taylor, a Virginia farmer and politician, wrote a rambling 700-page volume called “An Inquiry into the Principles and Policy of the Government of the United States.” Taylor singled out two threats to the economic order, “two modes of invading private property; the first, by which the poor plunder the rich, sudden and violent; the second, by which the rich plunder the poor, slow and legal.”
As the historian Arthur Schlesinger explained in “The Age of Jackson,” Taylor thought the first risk irrelevant — there simply weren’t enough hopeless poor folks in America to fuel violent revolt. Schlesinger added: “The real peril, he [Taylor] believed, lay in the second mode: plunder from above, orderly and legalized. The succession of privileged orders through history — the priesthood, the nobility, the banking system — showed how every age had known its own form of institutionalized robbery by a minority operating through the state.”
Candidates grow during campaigns. The firestorm over his taxes will give Romney just such an “opportunity.” Maybe he’ll surprise us and pull a “Nixon to China” on today’s version of plunder from above. If it happens, somewhere George Romney will smile.
Matt Miller, a co-host of public radio’s “Left, Right & Center,” writes a weekly online column for The Post. His e-mail address is email@example.com.