opportunistic politic

[jonathankaplan]

An American is taxed about 35% of their wage income (if they are in a high tax bracket). That American is taxed about 15% on their investment income (assuming the income is long term gains). So, why is it surprising that Romney, who has about 250 million in wealth, but has a wage income under one million, is paying net taxes of about 15%? Almost

Comments

[markgritter]

A big chunk of that is actually carried interest from Bain Capital ($13m over the two years according to CNBC.)

I don't know what the strategy is here, though. Gingrich seems to be making it an attack against Romney. But there doesn't seem to be a lot of political will around messing with the capital gains tax structure. Obama's millionaire surtax is just stupid--- we'd be a lot better off just reverting the capital gains tax back to 1997 levels. (It certainly seems like we've run this particular experiment long enough to see that it hasn't paid off in a big way.)

[jonathankaplan]

Not that big a chunk if it is over two years, but good point.

I agree completely with the second paragraph.
Thanks Mark!

[prock]

The other (less wealthy) candidates pay higher net rates on income because they have less wealth

I'm not sure what you're trying to say here, but if you're trying to point out that the "progressive" tax system we have is actually regressive, you're doing a good job of it.

[jonathankaplan]

I was really just pointing out the obvious numbers in the math, how could anyone really expect Romney's tax rate to be much higher given the nature of the types of income he has?

But yes, the tax regime is regressive. I think the Cap Gains tax rate should be raised, even though I also think that money has (indirectly) already been through the tax mill once, since corporations have already paid tax on their earnings. But the system is too loose in that regard, open to too much craftiness and too many deductions, so that money should be taxed twice. I don't think a long term Cap Gains rate in the mid--20s would be onerous, and is reasonable. Not politically though, these guys can't even see their way to raising the Gasoline tax, and every factor is screaming that tax should be higher.
Thanks, Andrew!

[prock]

even though I also think that money has (indirectly) already been through the tax mill once

You could make the same argument about regular income tax. All money goes through the mill an unbounded number of times.

[corwyn_ap]

It isn't surprising to those who know how taxes on investments work. I suspect that is a small percentage of people. Mostly it won't seem *fair* to anyone paying 35% on a *vastly* smaller income. I think I paid more than 15%, and I am near the poverty line.

[madkiwi]

You did not pay 15% of your income*(1) in taxes*(2). Holy crap math is bad in this country*(3

[corwyn_ap]

You are welcome to do my taxes if you'd like. Suffice it to say, many of your assumptions are off.

[madkiwi]

Any assumptions that are off would cause you to pay less in taxes than this simple, back of the envelope calculation. If you have dependents, are head of household or are married you would get larger deductions. If you earned significantly more than $12,000 then you lied about being near poverty level.

If you seriously paid 15% of your total earnings in federal income taxes then you had to have earned over $60,000 if you were single, a lot more if you are married.

I made my case. You are making stuff up.

[gunga_galunga]

I think in the abstract people understand that capital gains is taxed at a lower rate. But Romney is a living person that they can point to, in a year when you don't necessarily want to get pointed at for that. It's kind of funny, for months people have said, "what is Occupy Wall Street going to accomplish, they have no leader, no main goal." Yet, the whole 1% thing kind of has resonated and now I suspect there is a good chance it will cost Romney the nomination, as he is a living embodiment of what is kind of jacked up with the system

[jonathankaplan]

Nail right on the head.
Thanks!

[ext_2930210]

Good post. Food for thought.