Dean Baker Destroys Romney Low Tax Claim

Dean BakerI’m been thinking very hard (You know: frown, furrowed brow.) about this question of double taxation. The idea is that capital gains taxes should be lower because the money has already been taxed at the corporate level. I know that Paul Krugman accepts this, but I can’t find the article. I still haven’t figured it out.

But Dean Baker notes something amazing about Mitt Romney’s taxes. On the 60 Minutes interview, Romney did something really deceptive. When asked if it was fair that regular workers pay a higher tax rate than he does on his capital gains, Romney replied, “It is a low rate. And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as thirty-five percent.”

That gets us to my question about whether this whole idea of “double taxation” is valid. Dean Baker, however, notes that this question doesn’t even apply to Mitt Romney:

If the question is why does Mitt Romney pay a low tax rate, this answer is wrong. The bulk of his income comes from Bain Capital. Bain Capital is organized as a partnership. This means that income is not taxed at the corporate level. It is only taxed when partners like Mitt Romney receive it. So the story of double taxation simply does not fly in Romney’s own case.

To be fair, Romney never said that his income was taxed on the corporate level. But there is no other way one could reasonably take his statement. Regardless, Romney should be asked the question again. “Given that your income is not taxed at the corporate level, do you think it is fair that regular workers pay a higher tax rate?”

My guess is that this will lead to lots of equivocating about “job creators” and the “free market.” And maybe we’ll be treated to more information about how much he tithes to the church. That counts as a tax, right?


CatastropheAnyone who likes words can’t help but make up new ones. This isn’t that unusual. Even people who don’t value words do it. Sarah Palin, word salad tosser extraordinaire, notably coined the word “refudiate.” I do it all the time.

About ten years ago, I coined the word “catastrophize.” It turns out, it is a widely used term—especially in psychology and sociology. even has a definition for it:

ca·tas·tro·phize  [kuhtastruh-fahyz]

verb (used without object), verb (used with object), ca·tas·tro·phized, ca·tas·tro·phiz·ing.

to view or talk about (an event or situation) as worse than it actually is, or as if it were a catastrophe: Stop catastrophizing and get on with your life! She tends to catastrophize her symptoms.

It is a good definition, but it is not quite mine. To me, it is an active verb.

To catastrophize is take a situation or problem and extrapolate to catastrophe.

Example: the Hangnail

Situation: I have a hangnail.

Extrapolation: it could get infected; I don’t have health insurance so I will have to wait to get to the ER; by then, they will have to cut my hand off; I won’t be able to continue to work as a hand model.

Catastrophized Conclusion: I will starve to death.

Example: the Shortage

Situation: My cash drawer was $5 short today.

Extrapolation: I could get fired; I won’t be able to support my children; I will have to put my kids up for adoption; my kids are too old to be adopted.

Catastrophized Conclusion: I will have to sell my children for use as a filler in hot dogs.

Don’t Catastrophize Me!

I understand the impulse to catastrophize. Everyone does it. But it does no one any good. And it gets very tiresome. I can only stand to hear friends catastrophize themselves out of a job so many times. After a while, it is all like crying wolf, except it takes so much longer!

Do yourself and your world a favor: break the catastrophizing habit. Otherwise, your friends will stop taking your phone calls; then when your car breaks down on the road, no one will be able to help you; finally, you will die in your car after surviving for two day drinking your own urine; and it won’t matter at all that you told them things would turn out like this.

Noah Smith on Econo Trolls

EconoTrollNoah Smith is a very smart and often funny young economist. He runs the Noahpinion Blog, which has a different tag line just about every day. I keep up with his blog, but I don’t spend that much time on it because it is largely over my head. However, he has a better understanding of libertarians and their foibles than anyone else I know. For example: The liberty of local bullies; Libertarianism and the Tamerlane Principle; and Libertarianism is a “low-end” strategy of state formation. This is not to say that I always agree with Smith. In fact, it seems to me that he goes out of his way to be provocative. But he’s interesting. And smart. And funny.

He was in fine form yesterday when he wrote a long article about trolls on economics blogs. I recommend reading the whole thing, but I thought you all might like to see his section on Republicans:

How they see themselves:

<%image(20120925-reagan.jpg|320|180|How Republicans See Themselves)%>

How the world sees them:

<%image(20120925-gwb.jpg|246|320|How the World Sees Republicans)%>

Favorite blog: The Wall Street Journal editorial page

Favorite dead economist: Art Laffer

Will appear in response to posts regarding: taxes, politics, taxes

Craziest idea: Difficult to say, but probably a tie between bankrupting the country with debt, privatizing the prison system, invading Iraq, cutting funding for science, dishing out billions in pork to well-connected no-bid contractors, throwing millions of harmless marijuana users into nightmarish prisons, repressing gays, disenfranchising black voters, forcing millions of “illegal” immigrants into second-class citizen status, and blocking any sensible policy reform through the abuse of supermajority tactics in the Senate…

Special attack: Taking over the entire United States for three decades

Secret weaknesses: hot liberal chicks, fatty food

Notes: See also History, American, all

I particularly like the “Favorite dead economist” entry, because Art Laffer is not dead. But he might as well be. He greatly annoys me, because all he does is smile and babble.

Obama’s Plan on 60 Minutes

60 MinutesThis is an update on my article about 60 Minutes. In it, I talked almost exclusively about Romney. There was part of the Obama interview that made me cringe. It wasn’t that I didn’t know it already, but I hate to hear it.

Despite the hysterical conservative claims that he is a socialist, President Obama is a New Democrat. That means: a Democrat who doesn’t care that much about poor people. Don’t get me wrong, Romney would be oh so much worse. But as Dante showed us, not all levels of hell are equally bad. America now has two political parties that are dedicated to the interests of the economic elite. The primary difference between them is that one is also fascistic on social issues and the other is slightly less fascistic on economic issues.

Obama has made it very clear that he would like to “reform” entitlements. This is a nice “inside the Beltway” manner of saying, “Screw the poor and middle class.” This was well on display during Sunday’s interview on 60 Minutes. Steve Kroft asked, “How are you going to get [the Republicans] to change their minds and make this deal?” President Obama replied:

I—I won’t get them to make them change their minds. The American people will. I mean, ultimately, the American people agree with me that the only way we bring down our deficit is to do it in a balanced way. So, keep in mind, I’ve agreed with the Republicans. And we’ve already cut a trillion dollars of spending. And I’ve told them I’m prepared to do additional spending cuts and do some entitlement reform. But what I’ve said is, “You can’t ask me to make student loans higher for kids who need it or ask seniors to pay more for their Medicare or throw people off of health care and not ask somebody like me or Mr. Romney to do anything, not ask us to do a single dime’s worth of sacrifice.”

This is a really vile statement. He says that he is willing to make students pay more for school, the elderly to pay more for healthcare, and the poor to lose healthcare altogether (?) but he at least wants a tiny tax increase on the rich.

Let’s be clear: the poor and middle class have paid enough! The last 35 years have seen a huge redistribution from the poor and middle classes to the rich. It is not time for shared sacrifices. The 90% in this country have shouldered too much of the burden these last several decades. First, we get the rich to start paying for a proper share of the government. (Enforcing labor laws might help too.) Then, maybe we’ll see real incomes of the lower classes increase. Finally, we can talk about “shared sacrifice.”