Mitt Romney drew a lot of attention from campaign watchers Thursday night for a twist he added to his stump speech.
“We’ve got to make it easier for small businesses,” Romney said. “Big business is doing fine in many places — they get the loans they need, they can deal with all the regulation.”
Many took notice because Romney used the same phrasing President Obama did several weeks ago, when Republicans jumped all over him for saying the private sector is doing fine. But the revealing bit came afterwards.
“They know how to find ways to get through the tax code, save money by putting various things in the places where there are low tax havens around the world for their businesses,” Romney added. “But small business is getting crushed.”
The irony here, obviously, is that Romney’s acknowledging that big businesses have succeeded financially, despite the bad economy, because they use the same sort of tax avoidance strategies that have made his own tax returns such a political liability. But his tax plan would actually be a big boon to large, incumbent businesses. Romney’s proposing to transition the country to a territorial tax system, under which companies would pay no U.S. taxes on foreign earnings.
As liberal economist Dean Baker explains, that would only end tax havening in as much as big businesses wouldn’t need havens to avoid the IRS — and it would create an incentive for them to set up shop in any cheap, low-tax countries that would welcome them.
“These comments from Romney are kind of mind-boggling,” Baker said. “The story with much private equity, and it seems also with Bain, is that they know the tricks on gaming the tax code. They often buy businesses who don’t and therefore can get extra profit. I wouldn’t think that Romney would want to call attention to the way that he made his fortune, but either he doesn’t see anything shameful in it, or he doesn’t think anyone would make the connection.”
Romney’s comment made it sound like he wants to create an even playing field for big and small businesses. But his plan would make it easier for big businesses to avoid U.S. taxation than it already is.