Why Mitt’s Tax Returns Are VERY Important
In January of this year the Republicans had not yet selected a presidential candidate. Mitt Romney was widely expected to be the ultimate choice, however, and on January 19 Floyd Norris in The New York Times wrote an interesting piece based on that expectation. It was headlined: “Unearned, and Untaxed Unequally.”
It still makes very interesting reading today. Here’s a poignant line from that story: “Perhaps Mr. Romney’s ability to pay little in taxes will evoke interest in the issue this year.”
With that teaser in mind, here’s some tidbits from that piece — and some things it did not note but should have.
Unearned income (capital gains, interest, dividends, royalties, et. al.), on which a top tax of just 15 percent is levied, is the source of almost all Romney’s reported income. And here’s something the Times piece noted that has long seemed obvious to many of us. “It does seem odd,” wrote Norris, “that those who work for their money generally pay higher tax rates than those who simply collect investment income.”
Of course apologists for the rich who are the prime beneficiaries of this tax rate dichotomy have all sorts of rationales for it, the prime one being that it fosters investment. But consider this. You get this favorable unearned income tax rate even if its source hurts, not helps, the economy. It can, for example, come from a company sending jobs overseas that produce a capital gain and/or bigger dividends.
Should we really be giving investors a great tax rate for this sort of thing?
Now let’s turn to an aspect of our present tax system that leaps out from Romney’s tax return, an aspect that neither party likes to mention — the carried interest gambit. Romney doesn’t mention it because he and his Wall Street pals benefit so much from it directly. Obama shies away because some of his biggest contributors, according to news reports, similarly benefit.
Carried interest on private equity investment, noted the Times, “is taxed at capital gains rates even though the executives who get those payments typically made no actual investment, and are instead being compensated for their work in putting together and managing the investments. Mr. Romney, a founder of Bain Capital, continued to share in those payouts long after he left the company.” The piece went to note that it “seems odd that those who work in that one industry — private equity — get to pay lower rates than those who work in other businesses.”
Odd indeed. Unless one views it as a simple payback for campaign contributions. Or less charitably, an example of legalized bribery.
Now let’s move on to a question not raised in this piece but which comes to mind (or should come to mind) anyway after looking at Romney’s just released 2011 tax return. Working stiffs with earned income pay 6.2 percent in Payroll Taxes. Unearned income earners who don’t actually work for their income don’t.
Are there “good” reasons for these differences. Depends how you define good. For me, it would be very, very good if unearned income were taxed for these purposes, and the extra revenue generated were used to lower the Payroll Tax rates of working people with earned incomes, and their employers who also pay 6.2 percent in Payroll Taxes.
There’s going to be a lot of debate after this election, whichever party is in power, about changing the Tax Code. Mitt Romney’s tax returns offer a good starting point for this debate. It raises all sorts of questions about who and how to tax every group of Americans.
One overriding debatable question here that comes immediately to my own mind is this: Given how much folks like Mitt Romney already get away with when it comes to paying taxes, can any sensible, nay, any sane person, actually believe they should get still more?