Friday, July 13, 2012

Not releasing past tax returns is an enormous PR blunder by Romney campaign.

By Marc Jampole

Mitt Romney continues to refuse to release his past tax returns, while insisting that there’s “nothing hidden in them.”

It’s an untenable position, since it begs the obvious question, “If there’s nothing hidden, why not release them?” 

The answer, of course, is that the returns will likely show the enormous amount of money he makes, how he makes it and how he uses sophisticated techniques to avoid paying taxes.  We won’t see anything illegal in Romney’s returns, but we will probably see how much he still earns from Bain and be able to connect some of those earnings in certain years to layoffs of companies that Bain bought and sold. It will also probably show a number of tax avoidance techniques using loopholes in the current tax laws, such as “carried interest” and tax shelters in foreign lands. The returns will reinforce the notion that Romney is a fat-cat one-percenter who should be paying more in taxes.

The returns will be bad news for the Romney campaign, which is precisely why he should have released them already. 

Get the bad news out early and all at once. That’s one of the truisms that I have learned from 25 years of developing and implementing crisis communications plans for companies in many industries and of many sizes, including three of the largest chapter 11 bankruptcies in history.   Letting the bad news fester can only lead to three things, all bad for the company or individual:

1.      The bad news stays in front of the pubic longer.
2.      The bad news leaks out slowly, so what was just one story becomes many stories over time.
3.      When the bad news breaks, it will be bigger than it would have otherwise been, because added to the news is the fact of the cover-up.  Take, for example, Penn State’s child abuse scandal.

Once bad news is out there, the company or individual can address it, either by telling the world why it won’t happen again or by asserting its side of the story.  The second approach would be the one for Romney to take. He is already advocating the positions that enable him to make and keep so much money. The fact that he does what he says is okay shouldn’t surprise anyone. But by refusing to release the returns, the Romney campaign keeps the issue in the news and gives the Obama campaign a symbolic cudgel with which to beat Romney again and again…and again.

I can understand Romney’s reluctance to release the returns before he had sewed up the nomination, given the complicated tango he danced with the extreme right-wing of the Republican Party, AKA the Tea Party.

But if Mitt had asked me, I would have made a strong recommendation to release the returns as soon as he had a majority of convention delegates in hand. Once out, he could have responded to the criticism by saying, "There’s nothing illegal in the returns, so it’s a closed matter. Let’s move on.”

Romney would still have to defend his economic positions, he would still be a poster child for the fat cats and he would still be open to charges that his only concerns are for the wealthy and that he doesn’t care about anyone else.  But he’ll have to defend those accusations no matter what.  With the returns out, he could spend his time trying to explain to the American people why he thinks his tax policies work to the benefit of everyone (FYI, they don’t.)

By not releasing the returns, he reinforces the idea that something nefarious is going on. He turns a simple matter into a cover-up. And that’s much worse than admitting what everyone knows already: that like other wealthy people, he makes a lot of money and knows how to use existing tax laws to minimize his tax burden.

Tuesday, July 10, 2012

Obama plan to let temporary Bush II tax cuts expire but keep cuts for others will help weak economy.

By Marc Jampole

We start with the fact that we have both a weak economy and a heavy debt burden.  It would be great to reduce the debt, but…

If we let the temporary tax cuts of the Bush II Administration taxes end, people will have less money to spend, so the economy will shrink.

If we cut government programs which pump money into the economy, people will have less money to spend, so the economy will shrink.

How then to pay off some of our enormous national debt? 

The key to my mind is to let the Bush II tax breaks expire on money that does not create jobs. Two examples:

·        Any investment in the secondary market, which means, the buying and selling of stocks and bonds that do not result in additional funds for job-creating corporations. When you buy an initial offering of stock, the money goes to the company, but from then on, buying or selling that stock does not create any jobs, only transfers wealth between buyers and sellers.
·        The purchase of fine art and those luxury items for which high quality but less expensive substitutes are available. For example, producing a pair of luxury blue jeans costs about the same in materials and labor (including marketing) as producing a pair of quality jeans you can buy in a department store. It’s not the profit, but the costs to produce and sell that create new jobs. The enormous profit that the luxury item commands represents an exchange of wealth between the wealthy person buying the jeans and the wealthy people who own the company, but no additional jobs.

My point is that the more money you make, the more of what you make gets put into assets that do not create jobs or create relatively few jobs for the money spent. Virtually everything that the poor and the near poor make goes right back into the economy, as does most of what the middle class makes. It is only the wealthy and near wealthy who can keep much of their money out of the job-producing economy.

That’s why President Obama is absolutely spot on to propose letting the Bush II cuts expire, but only on those with incomes of more than $250,000.  As the President said earlier this week, “These tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth.”

As with any proposal to increase regulation or raise taxes on the wealthy or near wealthy, a major thrust of the Republican reaction is to invoke “small business.”  And as always, Democrats fall for it, hook, line and sinker and thereby let Republicans control the terms of the debate. This week, for example, there have been dueling versions of how many small business owners would have to start paying the additional taxes if the Bush II cuts expire for those earning more than $250,000: The President’s people say it’s a mere 3% who will have their taxes return to what they were before Bush II and Congress went “bat-Cantor crazy”; whereas the Republicans (purposely misunderstanding a detail of a non-partisan report) aver that it’s 50%. The very definition of small business is up for question: for Small Business Administration purposes, it covers businesses that have as many as 1,500employees and sell as much as $21.5 million a year. Sounds pretty big to me.

The entire small business argument is nothing more than a smoke screen. Whether one owns a small business, is a high-powered attorney, plays a professional sport or runs a public company, does it really matter how the money is earned? $250,000 is a lot of money to earn in one year, more than 98% of the population makes.  In our troubled time, it’s not too much to ask people to pay in taxes what they used to pay before the disastrous Bush II Administration.