Tax issue is sinking Mitt Romney

Mitt Romney has had a bad week, and his “maybe” answer regarding his willingness to release tax returns for prior years like his father did many years ago will likely go down as one of those iconic campaign moments that help define a candidate.

It was obvious to me for the past month that this would be a real issue. The tax code has been manipulated for years by lobbyists, and wealthy financiers like Romney get huge breaks, including the indefensible carried interest.

Romney is particularly vulnerable on this issue as he’s proposing to lower tax rates on the wealthy even more. Now he has compounded the problem with his muddled answers.

The ad above was created quickly after his disastrous debate performance. Right now the polls suggest he’ll lose the South Carolina primary to Newt Gingrich.

Mitt Romney’s tax return problem

Ann Romney (L) introduces her husband, Republican presidential candidate and former Massachusetts Governor Mitt Romney, at a campaign stop in Bethlehem, New Hampshire December 22, 2011. REUTERS/Brian Snyder (UNITED STATES – Tags: POLITICS)

The folks at BusinessInsider.com point out that Mitt Romney’s biggest problem might be his tax returns. So far he has refused to release his tax returns and he reiterated that position in a recent interview with Chuck Todd.

Romney’s campaign team has clearly decided that the political risk of releasing the returns outweighs the potential problems of not doing so. No one knows for sure what the documents would say, but by the candidate’s own admission, the bulk of Romney’s retirement income from Bain has been from capital gains, which are subject to 15% tax rate.

That means that for the past 10 years, Romney has likely been paying a lower tax rate than most middle class voters. If this is the case, that information could be devastating to Romney’s presidential bid.

The issue of tax fairness is huge right now, and Romney might become the poster-child for that problem. Warren Buffet has famously come out strong on this, saying that it’s not fair that he pays a lower effective tax rate on his income than his secretary.

I think this is a huge problem for Romney. If he makes it to the general election, the Obama campaign and the Democratic PACs are going to hammer him on not releasing his tax returns. If that issue catches fire and he ultimately releases them, then the story is huge.

But it’s huge regardless of when he releases them. He might want to just get it out of the way and have a response ready.

Either way this one can be problematic.

Elizabeth Warren takes on the “class warfare” issue

Elizabeth Warren is a natural because she can articulate her philosophy in a way that connects with regular voters. Here she takes on the “class warfare” charge.

Scott Brown must be getting pretty nervous . . .

Trigger happy

House Minority Leader Nancy Pelosi (D-CA) leaves a House Democratic Caucus meeting on Capitol Hill in Washington on July 29, 2011. UPI/Kevin Dietsch

I’m watching the coverage of the debt deal, and it’s difficult listening to people like Chris Matthews who manage to sound clueless as they let their emotions overcome their ability to think.

Of course this is a short term win for the Tea Party and the Republicans. They had leverage, as enough of them were crazy enough and dumb enough to let the stalemate continue through August 2nd, risking economic catastrophe.

Also, President Obama took the calculated risk of going for a grand bargain. Those efforts failed, and that made it more difficult in the end game. That said, he earned long-term political points, as the public was educated about the need for a balanced approach and polls show they support that in overwhelming numbers.

Now we move to the new gang of 12 and the next phase of the debt deal. Ezra Klein makes a great point, arguing that Democrats will likely prefer the trigger as opposed to a deal if the GOP won’t budge on revenues.

Start from the premise that Republicans will refuse any deal that includes significant new revenue and Democrats will realize that that’s just fine from their perspective, as Republicans can either cut a deal with them in December 2012 or all of the Bush tax cuts can expire. Now take a good, hard look at the trigger.

The Joint Committee is charged with finding $1.5 trillion in savings over 10 years. The trigger would only cut $1.2 trillion over 10 years. The Joint Committee is likely to cut Social Security, Medicaid and a host of programs Democrats aren’t going to want to touch if taxes aren’t part of the deal. The trigger exempts Social Security and Medicaid, and $1 out of every $2 in cuts comes from the Pentagon. The Joint Committee is likely to cut a deal without revenue, and Democrats will have to explain to their base why they permitted, say, Medicare cuts while letting the GOP reject tax increases. The trigger lets Democrats blame Republicans for protecting the wealthy in the 2012 election.

The trigger would also result in massive defense cuts.

So, if the Democrats prefer a trigger if a deal can’t include revenues, and many Republicans will want to avoid defense cuts, this gives the Democrats leverage!

These details are important, and commentators like Matthews should wait to understand these dynamics before whining about the deal.

The GOP’s Eric Cantor problem

House Majority Leader Eric Cantor (R-VA) speaks at the Faith & Freedom Conference and Strategy Briefing in Washington, June 3, 2011. REUTERS/Molly Riley (UNITED STATES – Tags: POLITICS)

The GOP discipline has completely broken down over the past week in the debt ceiling negotiations. All year they’ve been playing a game of Russian Roulette with the economy, trying to use a potential default to force massive spending cuts. In many ways the strategy worked well, as President Obama and the Democrats put just about everything on the table.

But, as usual, the ideologues are overplaying their hand, so much so that Mitch McConnell buckled under the pressure of the business community and basically said he’d let the president raise the debt ceiling without any cuts.

The guy at the center of all this is Eric Cantor, whose either too stupid or too ambitious to take yes for an answer. He can get massive cuts if he just includes some revenues in a deal, but instead he’s pushing the talks to the brink of disaster. Last night he also tried to imply that the President lost his cool in the last meeting, though all other accounts tell a different story.

Meanwhile, the polls are starting to shift in Obama’s favor with regard to the debt and the economy – at least when compared to congressional Republicans. That’s what happens when smarmy guys like Cantor become the face of the GOP.

Dana Milbank nailed it yesterday, even before Cantor’s latest performance last night in the negotiations where he again refused to budge.

He draws out the vowels in a style that is part southern, part smarty-pants. Had young Cantor spoken like this at his prep school in Richmond, the bigger boys may well have wiped that sneer off his face. Yet even then, Cantor was accustomed to having things his way. According to Cantor’s hometown Richmond Times-Dispatch, the quotation he chose to accompany his yearbook photo was “I want what I want when I want it.”

What Cantor wants now is power — and he is prepared to risk the full faith and credit of the United States to get it. In a primacy struggle with House Speaker John Boehner, he has done a deft job of aligning himself with Tea Party House members in opposition to any meaningful deal to resolve the debt. If the U.S. government defaults, it will have much to do with Cantor.

His antics from last night are being branded as childish, and the Democrats smell blood and are now taking direct aim at Cantor. Harry Reid is more than happy to negotiate now with Mitch McConnell who is desperate to avoid the potential catastrophe that he and other Republicans created.

They clearly thought Barack Obama would fold, but they were mistaken. Obama has called their bluff, and they look like panicked fools at the poker table.

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