Would Mitt Romney's tax plan keep his personal tax rate at 'around 15 percent'?
Wednesday, January 18, 2012
Mitt Romney is rich and he doesn't pay a lot of tax on his money.
We already knew that the presumptive Republican presidential nominee has boatloads of money -- more than $250 million by one estimate -- is no surprise.
Neither is it a big shock that Romney, like the also uber-rich Warren Buffett and dozens of big companies, pays little in federal taxes.
C'mon. The guy has enough money to buy accounting and tax law firms to make sure the sends as little as possible to the U.S. Treasury each April. We all should be so lucky.
But still Romney has been nagged about his taxes, most recently by the other GOP Oval Office aspirants. So the GOP front runner finally conceded this week that his tax rate is "around 15 percent."
Lower rate for many rich: That's pretty much in line with a Citizens for Tax Justice report from last fall which found that about one third of people with income in excess of $10 million annually get the majority of their income from investments and, because of the tax preference for this type of earnings, pay a lower effective tax rate than many middle-income taxpayers, who typically get their income from work.
Don't blame Romney and other millionaires+ for taking advantage of the tax laws.
The capital gains tax rates were cut in 1997 by President Bill Clinton and a Republican Congress from 28 percent to 20 percent. Then came President George W. Bush and a Republican Congress in 2001 to trim the top rate capital gains rate to 15 percent.
So Romney is doing what every law abiding taxpayer should do: Pay the minimum tax due according to the laws in place.
What would Romney do? The bigger question is not what Romney or any candidates pay in taxes now, but what would they pay if they got the chance to change the tax code?
The Citizens for Tax Justice has one answer. Its numbers crunchers say that under Romney's tax plan, the former Massachusetts governor would see his 2013 taxes cut by nearly half based on calculations using current law as a baseline.
Overall, says CTJ, Romney's $6.6 trillion tax plan would give the richest one percent of Americans an average tax cut of $126,450, which would be over 100 times as large as the average tax cut of $1,220 that the middle fifth of Americans would receive.
Of course, Romney is not alone in his tax reform approach. All of the GOP candidates still in the race have offered proposals that would cut the tax bills of taxpayers at all income levels. And the largest percentage of cuts in all of the plans go to the top 1 percent of taxpayers making the most money.
In fact, as the CTJ graph shows, compared to his GOP competitors, Romney has the lowest percent of tax breaks going to the wealthiest taxpayers.
The argument made by all is that the rich are paying more of the tax burden now so they should get commensurate breaks.
But being rich is difficult for candidates out on the hustings where they try to feel the pain of the Average Joe and Jane voters. Romney should just get real and say "I'm rich" and move on and let the voters make of it what they wish.
Awaiting the tax return reveal: I'm sure we'll get to see a snapshot of specifics on Romney riches after he locks up the nomination later this year. That's when he's indicated that he'll releases his tax returns.
Although I have some personal qualms about exactly what we voters can glean from such political tax voyeurism, making public at least a portion of IRS filings has been the election norm for a while now.
And it would at least allow us to confirm that it is capital gains taxes that are helping keep Romney's IRS bill so low.
We'll also find out whether he's able to shave some off his taxes by charitable donations.
If Romney follows the Mormon mandate to tithe, the church is doing quite well off the candidate's gifts. Romney gets to claim that as a charitable tax deduction to help reduce his tax bill.
And it might be part of the reason that although he received $374,000 in ordinary income for speaking fees, his overall tax rate was low.
That relatively small (for Romney) amount of money and how it figures into Romney's overall low tax rate fascinates Robert Lenzner, who writes the StreetTalk column for Forbes.com:
"[T]here's no way on earth he could get away with paying as little as 15% tax on ordinary income of $374,000 worth of speeches. No way, unless he used all kinds of special write-offs or special treatment. No wonder he doesn't want to disclose his tax returns before he wins South Carolina on Saturday. I don't blame him."
For now, though, Lenzner and the rest of us simply must wait, calculate, speculate and wish we had the same tax "problems" as Romney.
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