Just when it looked like Mitt Romney was coasting toward the GOP nomination, he ran into a wealth problem. The problem, contrary to what the Obama administration (and, much more subtly, Newt Gingrich) would have you believe, is not that Romney has too much money and pays too little in taxes. It’s that he apparently is incapable of discussing wealth, and the taxes that the wealthy pay, in a way that offers a compelling contrast to Barack Obama.
Romney was dinged during Monday night’s debate for not having released his past tax returns yet. He tried to play down the matter by suggesting he’d do so come April, when he files his 2011 return. And, ordinarily, one might rationally argue it’s reasonable for a presidential candidate not to disclose so much about his personal life before it is clear that he is at least going to be his party’s nominee.
This year’s election is not any ordinary election, however, because it will be fought largely — maybe even chiefly — on the grounds of class-warfare demagoguery that Obama has been preparing for months. And thus Romney, who is widely known to be wealthy, is not any ordinary potential nominee. The Republican Party has a genuine interest in ensuring it does not nominate someone who can’t stand up to attacks on wealth made by Obama and his surrogates in the Occupy tent camps.
Now, the mere fact that Romney is wealthy does not disqualify him. But his inability, so far, to speak about this issue in a way that changes the conversation in his favor might become a deal-breaker.
Romney let his slip show a bit when he proposed only to cut taxes on those who earn less than $200,000 — a clear sign he wants to avoid the wealth issue. But it’s only gotten worse in the last couple of days.
The first mistake was tactical: Relenting a bit to the pressure his rivals put on him, he said Tuesday that his effective tax rate is “probably closer to the 15 percent rate than anything.” He said he paid that approximate rate because most of his income since he left Bain Capital has come from investments.
But why give his critics such a juicy tidbit if he didn’t have the actual numbers on hand and wasn’t prepared to make a complete argument? He could have waited or, if he felt compelled to respond now, accompanied a rough estimate with an argument defending the current tax rate for dividends (without benefit of seeing Romney’s tax returns, one assumes he’s not making his money as a day trader). He could have pointed out that investment income has already been taxed once at the corporate level — and that, while there are high-profile exceptions, the average total tax rate over the past five years for companies in the S&P 500 was 32.8 percent, meaning most investment income is taxed rather significantly twice by the time investors receive it. He could have make a case, based on his experience in the private sector, that tax rates matter when it comes to capital formation, and that capital formation matters when it comes to economic growth and job creation. And/or he could have argued for eliminating tax loopholes in the corporate tax code and lowering the rate for all companies.
The second mistake was a thoughtless one: While making the aforementioned comments, he added, almost as an aside, that he also gets “speaker’s fees from time to time, but not very much.” Romney might not know how much, but financial disclosures he’s already made indicate that he earned more than $360,000 in such honorariums during a 12-month period.
If Gingrich and the other Republican candidates aren’t already cutting campaign commercials with that line — and the campaign so far makes one wonder if there’s any traditional Republican red line they won’t cross — you can bet Obama and the Democrats are already feeding it into their collection of Mitt “Gekko” Romney’s Greatest Rich Guy Hits. It is of course silly for a man like Obama, who reported nearly $1.8 million in income in 2010, to slam another person for being “rich.” But he will do it, and it will work — unless Romney is prepared to defend himself. The fact that Romney didn’t realize what he was saying, and how it would be played, suggests he hasn’t thought very hard about this issue. Alternatively, maybe he simply hasn’t come up with a defense he’s comfortable with making. Neither option is very reassuring to those who know how the Democrats will attack him.
At worst, it confirms the most legitimate, if not the most spelled-out, fear conservatives have about the man Gingrich calls a “Massachusetts moderate.” It’s not that he has held more liberal positions on certain issues in the past; there’s little chance a President Romney would revert back to those earlier stances once he settled into the Oval Office. Rather, it’s that his experience as a moderate (relative to the rest of the party) Republican in a mostly Democratic state conditioned him not even to recognize or fight back against common but wrong-headed progressive shibboleths.
Romney’s chief asset in this campaign, the one he has tried to highlight above all else, is his experience in the private sector. But if he can’t draw on that experience to beat back demagoguery about “the rich” and paying one’s “fair share,” it isn’t worth a buck in the political world of 2012.
– By Kyle Wingfield