On Monday, President Obama formally announced his proposal to extend the Bush tax cuts for 98 percent of Americans for another year, while allowing rates to return to Clinton-era levels for marginal income earned over $250,000. Commentators on the right were quick to dismiss the plan as “political theater” and class warfare, while Mitt Romney called it “another kick in the gut to the middle class” (apparently the top 2 percent of households are now middle class). But new revelations this week about Romney’s own finances—including details of his accounts in offshore tax havens like Bermuda and the Cayman Islands—demonstrate why the debate over tax policy is about more than simply winning votes.
According to a new study by the OECD, the United States now has the fourth highest level of income inequality among advanced industrial nations. Thanks to the “disproportionate income growth for top earners over the past two decades,” the report finds that “children born to low-income parents in the U.S find it more difficult to move up the social ladder than in most European OECD countries.” Our tax and transfer system is among the least effective at reducing poverty, and it’s gotten worse since 1980.
Statistics such as these are lost on Mitt Romney, whose tax proposal includes massively regressive tax breaks that would save the richest 1 percent nearly $150,000 a year, while increasing the national debt more than $3 trillionover the next decade.
The fact is, the budget deficit is too large and tax rates are at historic lows. The Bush tax cuts cannot continue without eventually bankrupting the government or destroying the social safety net, neither of which is a serious option. And so taxes must go up. But while rates will eventually have to rise across the board, most economists agree it would be counterproductive to put pressure on the middle class until the unemployment rate drops further. Until then, it is fair and reasonable to ask wealthy and successful citizens like Mitt Romney—who have benefited the most from the opportunities this country provides—to do their part.
Unfortunately, patriotism today has little to do with civic duty. That seems to be the consensus among Republicans like Senator Lindsey Graham, who defended Romney’s tax avoidance schemes, saying “It’s really American to avoid paying taxes, legally… . It’s a game we play. Every American tries to find the way to get the most deductions they can. I see nothing wrong with playing the game because we set it up to be a game.”
According to the Internal Revenue Service, some $5 trillion in U.S. assets are held in offshore tax havens like the ones used by Mitt Romney, costing the federal government around $100 billion a year in revenue that would otherwise help fund poverty reduction, health care, and education.