Wednesday, January 21, 2015
The early returns are in...
From my inbox last night at 9:40:
7 days of sick leave. 2 years free community college. Cure cancer and diabetes. Hope he doesn't raise my taxes!
And my initial response was: I hope he doesn't raise mine, either! Who does? (I pay an accounting firm good money to get me the lowest rate possible.)
Now the email above is coming from someone who probably pays a lot in taxes already. He's worked hard all his life and earns a lot of money.
While I don't know how much he makes or what his tax bracket is, I do know that Mitt Romney, when he was running for president in 2012, revealed that in 2011 he paid 14.1 percent on about $13.7 million in income. (That was up slightly from the 13.9 percent he paid in 2010.)
From an article in CNN Money (all emphasis mine):
The majority of the candidate's income last year came from his investments: capital gains ($6.8 million), taxable interest ($3 million) and dividends ($3.7 million).
This guy is retired, remember? It's not like he's out there working eight, ten or twelve-hour days like you.
But contrary to popular perception, Romney's effective federal income tax rate is still higher than that of most Americans -- 80% of whom have an effective rate below 15%. That number, however, does not include other federal taxes such as the payroll tax.
So, while Romney pays more than most Americans, how does his rate compare with that of, say, a high-earning doctor or lawyer? Well, I think about 300 grand would be a pretty good benchmark, wouldn't you? I mean, that's still a lot of money.
Romney's running mate, Paul Ryan, released his final 2011 tax return this summer. He paid $65,000 on $323,416 in income, giving him an effective tax rate of 20%.
So Ryan, who only made a fraction of what Romney did in 2011, paid a higher tax rate. Does that sound fair?
The reason Romney's rate is so low -- despite having one of the highest incomes in the country -- is because his income was derived almost entirely from capital gains and dividends from his extensive portfolio of investments. And that form of investment income is typically taxed at just 15%, well below the 35% top tax rate for high earners.
Republicans usually point out that capital gains and dividends are taxed twice as if this is some obscure fact that the rest of us don't know. But so what? Romney paid about 14 percent in taxes on about $14 million while Ryan paid about 20 percent on about $300,000. Does that sound right to you? Or what about Warren Buffett, the second-richest man in America? He famously admitted to paying taxes at a lower rate than his secretary!
If President Obama has his way (which he won't), capital gains taxes would be raised from 23.8 percent to 28 percent, back to the "confiscatory" levels of the (Saint) Reagan era. And those were the good ol' days!
But, forgetting for a minute whether higher taxes on the rich would be "fair" or not, wouldn't it make sense to put a few more bucks in the pockets of the struggling middle class? Isn't it inadequate demand that's holding back the recovery? How can we hope to have a thriving economy with a shrinking middle class? Who's supposed to buy all those goods and services the economy produces every year? The stock market can't go up forever on just exports. It's in all of our interests -- even the rich -- to see the middle class prosper.
Truth be told, even I would take a bit of a hit under the president's plan. Much of my current income is derived from capital gains and dividends. (This ain't the '90s.) But I think the Roosevelts had it right: We all do well when we all do well.