October 2, 2012
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Romney’s tax return, the rich and their investments
http://news.yahoo.com/democrats-political-slant-marks-romney-tax-return-070444703–election.html
Wednesday the first presidential debate will happen. This post will not be about what the candidates will talk about. I’ll write that after the debate happens. No, this post is about Mitt Romney and the brew-ha-ha over his tax returns. The most recent revelation has the democrats up in arms over his supposed machinations in order to get his paid tax in-line with a stated average 14% a year. Romney did not take the full deductions possible for charitable giving, thus his effective tax rate came out to be 14%. This tax of course is not more than is legally required because if he did, it would make him unfit to be president. Or so Romney says.
The interesting thing here is the extreme negativity that has resulted from his GIVING. Who cares if he gave money without getting credit for it on a tax return? I mean, if he used Turbo Tax he surely would have gotten a lower tax rate and that would mean he could lied about his effective tax rate. Even if he gave money to charity, it was to the Latter Day Saints, so that doesn’t really count. And he’s supposed to tithe 10% anyways, which he clearly hasn’t done that every year. All this makes Romney a candidate who you can’t trust, etc. etc.
*Sigh* Oh the woes of being a rich man, Yubby dibby dibby dibby dibby dibby dibby dum. One alternative has Romney painted as a miser who doesn’t pay his share of taxes, while the other crucifies him for manipulating his taxes so that he pays more. All are possible of course because he is fabulously wealthy to begin with. Quite different from our Jewish friend Tevye, who while acknowledging his poor status as nothing to be ashamed of, questions God on if some great cosmic plan would be destroyed had he a small fortune.
Well, there is no denying that Romney is rich. Some question his amassing of his personal fortune, but suppose we give him the benefit of the doubt and that he acquired it legally. He also gets most of his income from capital gains and dividend distributions which are “only” taxed at 15% through current Bush tax cuts. Being a rich man, Romney has invested substantially in companies, and has reaped the rewards. To the contrary, the poor man does not have such luxury. There probably are probably other “loopholes” that allow Romney to gain more than his poorer brethren, but let’s be clear that taxes on capital gains and dividends are NOT loopholes. It is current tax policy that affects everyone, even though disproportionately wealthy individuals can take advantage of paying only 15%.
Let’s ask a more basic question. If you had the means of paying only 15% on your taxes would you do it? Let’s ask another question. If you didn’t have to “work” for money would you do it? Let’s ask one more question. If you could take as many deductions possible on your taxes so that you would get a lower tax rate with the greatest return, would you do it? For the majority of people, my guess is yes to all those stated questions. As the Capital One commercial suggests, who wouldn’t want more money for the simple choice of switching to Capital One? Let your money do more work for you. Isn’t that the financial advice we all get and we all support? Isn’t that the reason why we invest in the market in the first place? Sure, most of us do not have the resources to put large sums of money into the market, but then again I think most of do put money into the market in some form of financial planning. Personally I invest in mutual funds, and invest through Sharebuilder. I don’t have huge sums of money, but I save what I can and invest what I can.
Now, let’s be clear about something else. I have not seen a single document that shows how much of the investment income Romney gained was used towards his personal living expenses. Of course this is no extrapolation to what Romney does because who knows really, but what do I do with capital gains and dividend distributions? I reinvest them! I don’t see much if anything in terms of discretionary dollars that I use towards living expenses. The point is that when I earmark something as investments, it is put toward the future, and at some point those investments are realized. It’s what we all do with retirement accounts, just not taxed, and what Romney does with the caveat of being taxed. Will I be a rich man when I retire? Probably not, but I used the very same market forces to accumulate my personal wealth.
Now, is something a loophole if everyone is bound to the same law or is something a loophole if there are ways to evade what should be common law? One could interpret Romney as evading taxes since he pays no income tax, but this ignores the fact that there are separate taxes based on different classes of income, not income itself, and is one that is open to all people. Now consider a tax policy that taxes the rich at double the rate for their capital gains and dividend distributions the than middle-class and poor. A progressive tax rate you say? Or is it a loophole, one perhaps even more egregious because it would allow different taxes based on different incomes and not the commonality of capital gains and dividend distributions?
Finally, one cannot demonize a rich man simply for being rich. Romney, for his faults (some that questions his presidential candidacy), cannot be faulted for giving nearly 30% of his income to charity, and he cannot be faulted for giving MORE to the government by not reporting the full amount of charitable deductions. As far as I know, there is no legal requirement for you to take charitable deductions in the first place. Furthermore, so what if gives most of it to a church? One may raise the issue of not reaching 10% (Romney got to 7% this year and 12.5% the year before), but how many of those who go to church give 10% as well? Since most appear to only give 2-3%, for you church goers, a certain parable should come to mind. The problem is
In the end, is it equitable to raise taxes on the rich so that you in the middle-class have better opportunity yourselves? The answer may be yes, after all we already use a progressive tax system. A differential tax based on capital gains for the rich however, doesn’t seem like a fair answer. At the same time, income tax alone doesn’t seem like the answer either, but if we are to only use income tax, how far are we willing to go? As far as they have proposed in France?
http://news.yahoo.com/france-unveils-budget-heavy-taxes-124501335–finance.html
