News Why Does Romney Only Pay 15% Taxes?

[russ_watters]

I'm not sure how you implied that from what Thomas said. There are many ways the rich benefit from the present tax code, e.g., paying much lower taxes on capital gains.

Capital gains rates is one of just two ways being discussed in this thread that enables the very rich to pay a lower federal income tax rate than everyone else [edit:Jeez, look at that - I said it now too! That should be a lower federal income tax rate than others with high incomes]. The second is large charitable deductions. Another way that is factually wrong, that Thomas said yesterday and turbo referenced in the post Thomas was responding to (so not implied: actually claimed), is the assumption that deductions predominantly benefit the rich.

I'd like to see other of the "many" ways, though.

...why is it considered "class warfare" to discuss the tax code? Bringing in terms like "class warfare" just muddles the issue.

It isn't class warfare to discuss flaws in the tax code, but it is class warfare to attack Romney or the rich simply for being rich or to use the issue for political attacks.

Plus it sounds all Fox-Newsy.

If you've got a better term, by all means share, but considering that warfare terminology is used by many who do it ("Occupy"), it seems an appropriate term to me.

[edit] Citation for the claim about deductions predominantly benefiting the rich/poor is Evo's link about who the 47% who pay no or negative income taxes are:

About 46 percent of American households will pay no federal individual income tax in 2011,
roughly half of them because of structural features of the income tax that provide basic
exemptions for subsistence level income and for dependents. The other half are nontaxable
because tax expenditures— special provisions of the tax code that benefit selected taxpayers or
activities—wipe out tax liabilities and, in the case of refundable credits, result in net payments
from the government. Most important of those tax expenditures are provisions that benefit senior
citizens and low-income working families with children. While those factors particularly affect
lower-income households, different provisions eliminate taxes for other households. Itemized
deductions and credits for children and education are more important for middle-income
households, while the relatively few high-income nontaxable households benefit most from
above-the-line and itemized deductions and reduced tax rates on capital gains and dividends.

In other words, for those who pay no income tax, about half of what causes them to pay no income tax is deductions and about half is due to the progressive nature of the tax structure. And virtually all of these people are lower income people. So while Romney is in a small group of super-rich who manage to get their effective tax rate cut in half, about a quarter of the population, almost all at the bottom, get their tax rate cut by 100% or more.

Personally, it looks to me like the quote is misworded in that there probably aren't two halves of the 47%, but rather two reasons that are half of the effect, shared in different proportions by different people (ie, a poor person both benefits from the progressive tax structure and gets tax credits). But either way, it proves the point.

 

[ThomasT]

... in the post Thomas was responding to (so not implied: actually claimed), is the assumption that deductions predominantly benefit the rich.

Ok, for now I'll concede that point. It's certainly true that many people, not just the very rich, benefit from deductions.

It isn't class warfare to discuss flaws in the tax code, but it is class warfare to attack Romney or the rich simply for being rich or to use the issue for political attacks.

I agree, and am not attacking Romney for being rich. His wealth, and what it took to attain and keep that wealth is a very positive thing, imo, and a point in his favor. My point wrt this thread is that Romney, and other very rich people, can afford to pay more taxes than he (they) actually pay(s), and, imho, the US tax code should require this.

 

[Jasongreat]

turbo;3730529]As Elizabeth Warren has pointed out, if you have made a fortune in business, good for you. BUT, your employees were educated by a public school system paid for by us. Your raw materials come in over a highway system paid for us, and you use that same system to ship your goods. Your electrical power, water, etc come to your plant thanks to taxpayers who established those utilities. If you deal in digital products, who paid for the Internet that you need to distribute them? There are no self-made men in this economy, IMO.

Public schools are usually paid for out of property taxes, do the rich pay more in property taxes? From what I have seen, the rich usually have 2+ properties and more times than not they send their children to private schools. Imo, they have paid for the children(future employees) to get their high school diploma. The highway funding comes largely from fuel taxes, who pays more for highways, the people driving one car that gets decent mileage, or a fleet of semi's moving products across this nation at bout 4 miles to the gallon? I have a hard time seeing how the rich haven't been paying their "fair share", or that the people have any right to their wealth.

The sense of entitlement surrounding the wealthy is palpable, and unwarranted. I grew up in a little town that was next to a slightly larger one. Before I was born, a birch-veneer mill was built in that town. The owners (brothers) and their GM had sports cars, big yachts, and other bling. BUT they paid for a brand-new elementary school to be built in town, paid for a general-assistance program to help poor people, and IIR, paid for the property and lots of the construction costs for the new junior-high/HS that opened a couple of years before I got out of elementary school. They were rich, but they had some sense of responsibility to the community. I don't see that as much, these days.

So Iyo, you feel that the producers are the ones who feel they are entitled to others money, at the same time you argue that the masses deserve more of their wealth. Imo, it is the masses(and politicians) who have a sense of entitlement, not the rich. I find it interesting how you start your story, of the not as evil rich, by saying they own all these fancy things, but they still did things for the community which redeemed them in your eyes. One question, who builds those fancy cars, fancy houses, and all the other bling? Isnt it employees, of other rich people, who are employed solely because someone is buying their product? If no one buys those products who looses, the rich, or the workers? There are tons of products that if it wasnt for rich, those products would disapear. The rich would still be rich, the workers would be unemployed though. Imo, any regulation put in place will never affect the rich, they have the resources to get around them, the ones who get hurt are those who cant, the masses, and it is because of the regulations that all the loopholes the "evil rich" use, exist.

= lisab: I'm not sure how you implied that from what Thomas said. There are many ways the rich benefit from the present tax code, e.g., paying much lower taxes on capital gains.

And the rest of us don't get that same rate? Lisa, please remember that capital gains have already been taxed at around 35% as corporate income, before it gets taxed again. Imo, capital gains and profits are all that should be taxed, but aslong as our income is getting taxed, I have a hard time getting behind a plan to then tax those gains and profits again. Either our income should be tax free, or our profits should be tax free, I vote for income. It seems to me that one of the big things we hear now-a-days is how those evil rich people are making too much profit, well I say tax the profit and that would get companies to reduce profit, instead of the system we have now where everyone tries to lower their income either by deductions and contribributions. Who has the resources to hire a team of accountants to lower their effective tax rate, the rich, or the rest of us?

Romney paid his legally required taxes, it funny when he gets lamblasted, by people like Al Sharpton who owe millions in back taxes, or by an administration which has tax cheat timothy geitner, or by other 1%'ers like buffet and pelosi, who have used the exact smae tools to lower their tax rates.

 

[russ_watters]

I agree, and am not attacking Romney for being rich. His wealth, and what it took to attain and keep that wealth is a very positive thing, imo, and a point in his favor.

Understood - and while it isn't your position, you acknowledged the reality that the "class warfare" issue is/will be a big one for Romney in the election. We're on the same page on that.

My point wrt this thread is that Romney, and other very rich people, can afford to pay more taxes than he (they) actually pay(s), and, imho, the US tax code should require this.

On that we are agreed as well.

 

[WhoWee]

For perspective - here's the effective tax rates for a few years - http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456 (this is CBO data, just easier to read IMO)

So for every 1 Romney that is paying 15% taxes... there are 5 others in the same income paying at least 35% taxes. The justification for the 'Buffett rule' doesn't align with the 'Buffett facts' IMO.

I love the irony of the "Buffett rule". I'm a firm believer in the old saying ":...the truth will set you free..."
http://www.forbes.com/sites/paulrod...y-likely-makes-between-200000-and-500000year/

"Warren Buffett's Secretary Likely Makes Between $200,000 And $500,000/Year

Comment now Warren Buffett’s secretary, Debbie Bosanek, served as a stage prop for President Obama’s State of the Union speech. She was the president’s chief display of the alleged unfairness of our tax system – a little person paying a higher tax rate than her billionaire boss."

 

[Evo]

YAY! WhoWee is back. Wait, there was no IMO in that post, are you sure that you're the real WhoWee?

 

[Char. Limit]

Stuff

Thank god you're back! I was starting to get worried.

 

[JonDE]

I love the irony of the "Buffett rule". I'm a firm believer in the old saying ":...the truth will set you free..."
http://www.forbes.com/sites/paulrod...y-likely-makes-between-200000-and-500000year/

"Warren Buffett's Secretary Likely Makes Between $200,000 And $500,000/Year

Comment now Warren Buffett’s secretary, Debbie Bosanek, served as a stage prop for President Obama’s State of the Union speech. She was the president’s chief display of the alleged unfairness of our tax system – a little person paying a higher tax rate than her billionaire boss."

Unfortunetly I have to disagree with this article. I read it and there is a flaw in their premise. They are mixing two different statements from Buffet to get the outcome they wanted.
He commented that he pays a lower percentage then his secretary, and that his staff on average pays 34%. Forbes took that to say that his secretary is paying 34% and calculated the numbers based on that. In truth she could be only paying 18% and be well below his average staff member, which according to forbes would put her into the 100,000-200,000 range.
The exert from their article, I will bold the misleading part.

Buffet himself declares that he pays a 17.4 percent rate on taxable income. His staff, like Bosanek, pay an average of 34 percent. The IRS publishes detailed tax tables by income level. The 2009 results show that the average taxpayer paying Buffet’s 17.4 rate earns an adjusted gross income between $100,000 and $200,000. But an average taxpayer in Bosaneck’s rate (after downward adjustment for payroll taxes) earns an adjusted gross income of $200,000 to $500,000. Therefore Buffett must pay Debbie Bosanke a salary well above two hundred thousand.

 

[OmCheeto]

I'm not sure how you implied that from what Thomas said. There are many ways the rich benefit from the present tax code, e.g., paying much lower taxes on capital gains.

And let's not forget:

Getting $9 billion tax free. (The Duncan kids)
Getting $20 million x 5 tax free. (The Romney boys.)


Where's Ronald Reagan when you need him...

https://www.youtube.com/watch?v=cgbJ-Fs1ikA#!

...they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying ten percent of his salary, and that’s crazy.

Thank you Mr. Presidents!

 

[ThomasT]

And let's not forget:

Getting $9 billion tax free. (The Duncan kids)
Getting $20 million x 5 tax free. (The Romney boys.)

I'm against inheritance and gift taxes, but for the elimination of tax loopholes and the general simplification of the US tax code.

 

[OmCheeto]

I'm against inheritance and gift taxes, but for the elimination of tax loopholes and the general simplification of the US tax code.

As a PPP*, I'm used to scraping up coins from wherever it is available: Under the seat cushions, bottom of the wash machine, etc, etc. I consider inheritance and gift taxes simply as another source of income.

The distinguished Representative from my state posted a link this morning on facebook to the Romney vs. you income comparison calculator.

If one plugs in the average American salary for 2010($41,674), you'll see that it would take the average American a little over 500 years to make what Romney makes in one.

Now, if you jump to your spreadsheet and plug in the numbers for inheritance for the two families, you come up with the following:

$9 billion (The Duncan descendants: 4 kids + 4 grandkids = 8)
Amount each Duncan gets with no estate tax: $1.125 billion
Time it takes the average person to make that much: 26,995 years
Amount each Duncan gets with 35% estate tax - $5M deductible: $733 million
Time it takes the average person to make that much: 17,589 years
The average person's perception of the difference between having $1.125 billion vs. $733 million in their Swiss bank account?
Fill in the blank: ________________
Revenue lost by not taxing them: $3.136 billion$100 million (The Romney boys = 5)
Same thing, only the Romneys are paupers in comparison.
$20 million untaxed vs $14.75 million taxed, each
480 vs 354 years for the average American to make those amounts, respectively.
Lost revenue: $26.25 million.

And if you think I'm jealous of their wealth, think again. I retire in 884 days, and plan on starting my own business. I plan on selling it ten years later for ONE BILLION DOLLARS! Even if they tax me at the rate when I was born(91% top marginal), I'll still take home 90 MILLION DOLLARS that day. I can live with that.

Which if I were to try and bring that home at my current income, would take me around 3000 years. Which makes me wonder why all my friends think it's stupid for me to retire early. It's amazing how stupid other poor people are. Bottom feeders...

And what would I bring home under today's tax rate? $650 million dollars.

hmmm... For me, once again, as a retiree, I wouldn't be able to tell the difference.

Ok... Well... Then again, maybe I could:

$250,000,000 yacht

+$20,000,000 annual operating costs
vs.
$11,000,000 yacht
http://thed2life.com/wp-content/uploads/2011/03/lvmh-32m-yacht-0.jpg

Oh dear, not having two helicopters, 2 submarines, 7 tenders, and a bevy of jet skis on board would really cramp my style. Good thing we've got the tea party watching future Om's wallet for him.

No new taxes! No new Taxes!*PPP = Perpetually Poor Person
Though I do own 4 boats, 1 nearly brand new car, 1 almost paid off house, and I've been investing in the stock market for 4 years now. So poor I guess, would only be relative to the Romneys and Duncans.

 

[WhoWee]

And let's not forget:

Getting $20 million x 5 tax free. (The Romney boys.)

From your link:

"The Romney kids will have to pay taxes when they start taking income from the trust their father set up for them—at the usual 15 percent rate paid by millionaires, of course—but the inheritance itself is blissfully tax free."

I have a question - how is the inhertance "blissfully tax free" when they will be taxed - (in the future) when distributions are made from the trust? my bold

 

[Moonbear]

From your link:

"The Romney kids will have to pay taxes when they start taking income from the trust their father set up for them—at the usual 15 percent rate paid by millionaires, of course—but the inheritance itself is blissfully tax free."

I have a question - how is the inhertance "blissfully tax free" when they will be taxed - (in the future) when distributions are made from the trust? my bold

The difference is only taxing what is used as it's used leaves the remainder to earn interest, dividends, etc. on the full amount rather than taking taxes off the top up front and having a much smaller amount to keep earning more money.

 

[OmCheeto]

The difference is only taxing what is used as it's used leaves the remainder to earn interest, dividends, etc. on the full amount rather than taking taxes off the top up front and having a much smaller amount to keep earning more money.

And what if Gingrich wins? No capital gains tax = Ha ha poor people!

Gingrich pledges to eliminate capital gains tax

Republican presidential candidate Newt Gingrich has his campaign set squarely on the economy as the number one issue. To fix it, the former speaker of the house's tax plan is geared to creating jobs by eliminating taxes on capital gains, abolishing estate taxes,

bolding mine

Ah ha!

I'm not going to sell my company for A BILLION DOLLARS! I'm going to keep it!
And I will make my company pay dividends of 10%.
That will give me $100,000,000 a year to play with, TAX ******* FREE!

Ah! hahahahahaha!

Suckers...

Now I just need to adopt someone so I can leave my BILLION dollar company to them, TAX ******* FREE!


And the Om dynasty begins...

Muah ha ha ha...

https://www.youtube.com/watch?v=jTmXHvGZiSY

Oh dear. On the other hand, only taking home $100,000,000 per year means I'll have to take out a loan to buy Paul Allen's yacht. Poop. I'm feeling poor again.

 

[ThomasT]

I have a question - how is the inheritance "blissfully tax free" when they will be taxed - (in the future) when distributions are made from the trust? my bold

Because no tax was paid on the inheritance transaction itself. And this is, imo, as it should be. As you note, any income garnered via future manipulations of the inheritances by the heirs will be taxed. Which again is, imo, as it should be ... except that if person A gives a gift of x dollars to person B, including eventual inheritance transactions, then I don't think that that should be taxed. What should, imo, be taxed at a somewhat higher rate than it is now is interest income, dividend and other investment income, any capital gains. But I don't think that inheritances or gifts should be taxed.

I suspect that Romney would agree with my opinion on not taxing inheritances and gifts, but would disagree with increasing capital gains and other taxes which would primarily impact the fortunes of the wealthy.

Wrt the OP, there's absolutely nothing wrong with Romney or anybody else paying as little tax as they're legally able to do. But, imo, Romney and his ilk are part of a problem wrt American society whereby a tiny minority of Americans are able to amass ridiculously large fortunes by manipulating money and making informed/insider bets in the various markets, while the overwhelming majority of Americans who actually do constructive work make peanuts.

Imho, if the aim is to improve America, then somebody like Romney, in view of his stated positions on various issues, can't be considered a suitable candidate for the office of the presidency -- because his election would entail nothing more than 'business as usual' imo.

 

[russ_watters]

Wow, that's an interesting one - and not one I'd heard of. Looking into it, the way I understand it is that the venture capital firm gets paid a share of the future profits of the company they invest in. But because the initial value of such a deal is zero, there is nothing on which to base a gift tax (if transferred while the value is zero). It is a bit like giving the gift of a winning lottery ticket before the ticket is discovered to have value.

I don't actually see an issue with this at first glance, but then I'm not a fan of inheretence taxes anyway.

 

[WhoWee]

The difference is only taxing what is used as it's used leaves the remainder to earn interest, dividends, etc. on the full amount rather than taking taxes off the top up front and having a much smaller amount to keep earning more money.

A conceptual slippery slope - IMO.
http://www.irs.gov/taxtopics/tc424.html

"A 401(k) plan is a type of tax-qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis. Generally, these deferred wages (commonly referred to as elective contributions) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF)."

 

[ParticleGrl]

Looking into it, the way I understand it is that the venture capital firm gets paid a share of the future profits of the company they invest in. But because the initial value of such a deal is zero, there is nothing on which to base a gift tax (if transferred while the value is zero). It is a bit like giving the gift of a winning lottery ticket before the ticket is discovered to have value.

Its sort of like that- when a fund performs, the principle partner takes a slice of the performance. Its basically a commission, but it gets taxed like capital gains for no obvious reason.

Being able to gift the potential gains is like being able to gift performance bonuses- which for some reason we can do with certain types of funds, but we can't do with (say) sales commissions.

The problem I have is that a well off family with a 10 million dollar estate has only a limited ability to get around the estate tax (even still, they won't on a significant chunk because of things like property left to the spouse, etc). A supremely well off family with hundreds of millions in estate can transfer huge amounts of cash tax free.

As it stands now, our tax code says that money made investing is better than money made from starting a company. It further says that hedge fund/leveraged buyout/private equity investing is better than mutual fund type investing. It also says that the wealthiest estate's built from the "good" type of investing should get to keep a far larger percentage of their wealth over time. This doesn't make sense to me.

 

[ThomasT]

As it stands now, our tax code says that money made investing is better than money made from starting a company. It further says that hedge fund/leveraged buyout/private equity investing is better than mutual fund type investing. It also says that the wealthiest estate's built from the "good" type of investing should get to keep a far larger percentage of their wealth over time. This doesn't make sense to me.

I think it makes sense, if it is, in fact, the case. But I don't think it's good for the country. One might ponder how this state of affairs came about. And I think that that has an easily enough inferable answer. So, the next question would have to do with what can be done about it, if it's deemed to be a negative thing for America and most Americans. Wrt this, it seems obvious to me that continuing to vote for Democrats and Republicans won't result in any significant changes.

So what seems to be necessary is a new American political party.

 

[jduster]

I'm not blaming him personally, so please don't take it that way. Most people are going to pay what they have to pay. What I blame is our tax code that allows for too many deductions.
In 2010 Romney paid 13.9% taxes. In 2011 he expects to pay 15.4%

http://www.rocketnews.com/2012/01/wealthy-romney-pays-13-9-tax/

Keep in mind:

1) He tithes also. He donates 10% of his income to the LDS church, which spends most of its money on charity and community service.

2) It's not loopholes and deductions. He makes almost all of his money on capital gains. His income tax rate is 35%, but capital gains tax rate is much lower.