A quick pop quiz for the upwardly mobile couch potato: what theme unites virtually all our marquee cable television shows?
If you guessed picturesque violence as a means of psychological liberation you are technically correct. But I have in mind something even more fundamental. Strip away the circumstantial differences and The Sopranos, The Wire, Breaking Bad, Deadwood, and Weeds are all about the acquisition of capital, territorial expansion, the liquidation of assets and enemies.
Americans love this story. It’s a kind of bootstrap fairytale that exalts the glories of the free market for those willing to unyoke ambition from conscience. We know, in our brains, that Tony Soprano is a gluttonous thug. But in our rancid capitalist hearts we root for him anyway.
At least I do.
I’ve been thinking about all this because last week Americans got a rare peek at how the One Percent actually rolls in this country. All it took was the disclosure of a single annual tax return by Republican frontrunner and part-time humanoid Mitt Romney.
Mitt released his return under duress, having concluded (rightly) that not releasing it would only prolong the media narrative. He did so on the same day as the President’s State of the Union Address, and the announcement of this year’s Oscar nominations, which wasn’t quite enough to bury the matter.
The short version: Mitt paid $3 million in taxes on the $21.7 million he received in 2010, for an effective rate of 13.9 percent. The former governor, whose grasp of his own finances is charmingly fuzzy, originally told reporters that he paid “about 15 percent” in taxes, which translates as another $240,000. (A quarter of a million dollars is known, in Mittville, as “a rounding error.”)
Of course, the big revelation for those of us not intimate with affluence was that Mitt’s millions are what economists call – with no apparent sense of irony – “unearned income.” Mitt doesn’t work for his money. His money works for him. Had his $21.7 million been earned, it would have been taxed (theoretically) at the top rate of 35 percent. That’s $3.6 million more in taxes.
Those politicians who decry unemployment benefits as a dangerous inducement for people not to work would do well to ponder this scenario.
There were lots of other fascinating tidbits from Mitt’s disclosure, including the fact he had a Swiss bank account, and dough socked away in several countries considered tax havens, from the Cayman Islands to Ireland. But the most striking thing on display was the essential nature of extreme wealth.
Your average American still conceives of wealth along the Soprano model. Tony, he sees an opportunity, bribes the necessary officials, bumps off the necessary rivals, and collects the booty. We like to think this way because it means that with sufficient industry, imagination, and risk, we too might become Tony. Or at least Paulie Walnuts.
But the vast majority of wealth in this country is passive in nature, occasionally amassed but far more often inherited. Rich people make money not by doing things but by owning things. They own stock and collect dividends. They own bonds and earn interest. They position themselves in such a way that money has to flow through them to get to somewhere. (This is called leverage.) Or they play one force against another, such as hiring a Chinese worker to perform labors formerly undertaken by an American, then selling the resulting product for the same price and pocketing the difference. (This is called arbitrage.)
Mitt’s labors at Bain Capital consisted, almost exclusively, of leverage and arbitrage. He bought companies, often with borrowed money, improved their financial health—or at least the appearance thereof—then sold them at a profit. Sometimes, the companies failed and people lost their jobs. Bain executives awarded themselves special dividends anyway. It was a very Soprano way of doing business.
Mitt’s current income, by contrast, derives from his manipulation of our financial and tax regulations.
That’s what the public is finally figuring out. Or, anyway, what it has an opportunity to figure out. Really rich people don’t work harder than the rest of us. They don’t sit around dreaming up new ways to create jobs, or rejuvenate the economy. They hire lobbyists to craft legislation, and asset managers who can navigate the ensuing maze of loopholes.
To offer but one example: back when Mitt actually was a working stiff, he availed himself of the so-called “carried interest” loophole. This allowed him to be paid a deferred salary from Bain in the form of capital gains. And thus to have the untold millions he earned was taxed at 15 percent rather than 35 percent.
Nobody knows how much money this allowed him to avoid paying in taxes, and we are not likely to find out, because citizen Mitt Romney really wants to be President. I am going to estimate a gazillion dollars. Give or take a quarter a mil.
In the boom years following World War II, President Dwight Eisenhower enforced a top marginal tax rate of 91 percent. The idea was to force the super rich not to sit on their dough but to reinvest it by opening factories and hiring workers.
If you take a quick look at this chart, you will see that I am not actually making this up. You will also notice that in 1982, when Ronald Reagan took office, he and his loyal Congress lowered the top tax rate from 70 percent down into the 30s, where it has remained ever since. The result has been a steady upward surge of wealth. Everyone else has seen wages stagnate and benefits plummet. Also: massive federal and state deficits.
I realize I’ve gone somewhat wonky here. But the point is simple: the most crucial issue of the 2012 campaign already has emerged. Will voters—offered an object lesson in extreme wealth—finally revolt against the glittering mythos that protects our gilded class?
Mitt’s job, in the days ahead, will be to convince us that he’s Tony Soprano – the private sector Godfather who can make us all rich, rather than Willard Romney the amazingly life-like tax cheat. He will rely both on his personal fortune, and the lucre pouring in from those who stand to benefit from his policies. He’ll at least flirt with choosing as his running mate New Jersey governor and Tony Soprano body double Chris Christie.
But his greatest ally, I’m afraid, will be our own capacity for self-delusion. After all, Americans can be counted upon to ignore the most obvious signifiers of our own predicament.
The truth is, we can’t become Tony Soprano because we don’t belong to the mafia and because we lack his gift for psychopathic greed. But we can still vote for him.
I realize I should conclude by quoting from Mitt’s most recent gospel of prosperity, in which he said unto CNN, the morning after claiming the Florida primary, “I’m not concerned about the very poor.”
But that feels like dirty pool.
Instead, let me offer a more intimate and revealing statement, which also recently emerged from his mouthhole:
“I believe in an America where millions of Americans believe in an America that’s the America millions of Americans believe in. That’s the America I love.”
Let’s do this thing, Paulie.