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This page contains a single entry from the blog posted on January 25, 2012 4:45 AM. The previous post in this blog was Giving up on Eileen Brady. The next post in this blog is Next Portland handout: Spanish windmill outfit. Many more can be found on the main index page or by looking through the archives.



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Wednesday, January 25, 2012

Pundits slightly wrong about Mitt's tax rate

The tax policy wonks, the presidential campaign followers, and many others are grinding out the commentary about Willard "Mitt" Romney's tax return, which hit the intertubes yesterday, all 203 pages of it. One of the things folks are focusing on is the candidate and his wife's effective (average) rate of tax -- an obvious indicator of whether the guy's paying a fair share of his income to support the federal government. But we think that most of the media commentators have got the rate a little too high, because they're looking at the wrong taxes.

The writers, including at both Timeses (L.A. and N.Y.), say that Romney's tax rate in 2010 was 13.9%. But they're counting self-employment tax in there, and that's not included in what most people think of when you ask them their federal income tax rate. Self-employment tax all goes to Social Security and Medicare, and for most folks, that sort of tax is sent off to the federal government as "FICA" -- taken out of their paycheck (matched by their employers), and never appearing on their tax returns at all. And so we don't think it's really fair to be taking that tax into account when computing the Rommeister's tax rate. (They're probably also including the payroll tax that the Romneys paid toward their household servants' Social Security and Medicare, which is also not what most people would think of as the couple's federal income tax.)

In 2010, the Romneys forked over $29,150 of self-employment tax on self-employment income of just under $594,000 -- around 4.9% of that income, all of which went to Social Security and Medicare. (It was actually 15.3% on the first $108,800 of self-employment income, and 2.9% on the rest.) The payroll tax on the household servants was $4,270.

If you leave self-employment and payroll tax out of the equation -- the way most people do when they talk about federal income tax -- the Romneys' tax was $2,976,345, on gross income of $21,661,344. That works out to an effective tax rate of 13.7404%.

Even after taking his deductions and getting hit by the alternative minimum tax (which even upper-middle-class folks like ourselves pay), Romney made out like a bandit. His taxable income was $17,120,067, and his tax was $2,976,345. You math majors out there already have the rate: 17.39%. Not bad.

Comments (15)

Would that be about the same that John Kerry paid?

Oh, yeah - Mr. Teresa Heinz.

Maybe we can dig up Jack's in-depth analysis about the tax return of his pick for 2004: the Silky (very ill, now) Pony.

I have to disagree with your excluding FICA.
If it's part of my pay and the government takes it then it's a tax, period.

But, but... Mitt is my free market hero! I will gladly give up approximately 47% in taxes when I get my annual bonus. I understand that's my punishment for working for someone else and not being a "Job Creator" or "Layoff/Outsourcing Titan of Industry"...

Romney is also part of the slimy group that stole most of Howard Hughes empire and have been profiting from it ever since.

So he paid $2.9 million in federal taxes yet he "made out like a bandit." What number would you consider fair?

Most government services that we value are provided by state/local governments and special districts -- schools, parks, libraries, police, fire, etc. So if we forced "rich people" to pay more in federal taxes, what would any of us get in return? More fed pork for light rail or subsidized solar energy firms? A larger HUD or Commerce dept?

I'm not a Romney fan, but as long as his tax returns are legal, I'm not sure what the concern is about his tax payments. He didn't write the fed tax code.

"Romney made out like a bandit. His taxable income was $17,120,067, and his tax was $2,976,345. You math majors out there already have the rate: 17.39%. Not bad."

Or put another way, Romney's almost $3 million in federal income tax was more in federal income tax than was probably paid by everyone who reads this blog put together.

Was there anything illegal about positions Romney took on his return? If not, you're complaining either about the present tax Code, which Romney followed but certainly didn't write, or that you don't like the fact that he made so much money.

The same people that "made out like bandits" also financed congress to write the current tax law- so although technically legal- a huge slap in the face to a democratic society.

It is also technically legal for members of congress to trade on inside information- is that OK too?

What number would you consider fair?

$6 million.

you're complaining either about the present tax Code, which Romney followed but certainly didn't write

He abused the capital gain provisions of the tax law with his "carried interest" schemes. Just like the ones you use, Bob.

I still do not get the logic of taxing long term CG at a lower rate than regular income. A wise man, who read from the code daily, taught me that "income is any benefit what whatever source derived."

I remember that but keep forgetting the years my kids were born.

And for us under the 7 figure mark self employment tax of 15% vs. the 8 point something in FICA is brutal. S - Corp anyone?

And apparently Romney's kiddos pay an even lower rate than Mittens, a nice benefit of estate planning for the super rich.

I'm sure Jack can correct this if I misunderstood what Pulitzer prize winning reporter David Cay Johnston of Reuters was reporting on CNN.

DCJ: "The Romneys gave $100 million to their sons and paid not one penny of gift tax...last night, Brad Malt, the attorney for the Romneys, confirmed to Reuters that we were correct. They have not paid a penny of gift tax. That's because Congress allows a very tiny group of people — the Romneys by their income are in the top 1% of the top 1% — to not count as having any value the real source of their income, something called carried interest, if they give it to their children."

Of course these patriotic job creators will have to start paying their 15% when they start taking income from their blind trust, but their $100 million seed money is tax free.

In all seriousness, I don't begrudge these people their extreme wealth. I've been known to buy a lottery ticket now and again on the off chance I get struck by lightning and end up with a fraction of their wealth.

However, it is absolutely ridiculous that these people are taxed at a lower rate than teachers, firefighters, factory workers and the other 99%.

Beef up the estate tax and either raise the rate on capital gains or put in place a sturdier alternative minimum tax that ensures that the wealthiest American are paying at least as high a rate as the middle class. 30% sounds like a good starting point.

Gift tax is a whole different tax from the income tax. I do not have the Romneys' gift tax returns, and I have no idea what they may have paid or not paid.

With gift tax and estate tax, the game that's played is to give your loved ones things that are expected to grow in value, before they grow. The tax is imposed on the value at the time of the transfer -- future growth of the assets in the kids' hands is gift (and estate) tax-free.

The IRS wimped out on taxing "carried interests" like Mitt's (and Original Bob's) under the income tax a few decades ago. I am unaware of the IRS's position on transfers of those interests for gift tax purposes. Just because the Romneys didn't pay gift tax doesn't mean they were right; and the statute of limitations may still be open, depending on what they disclosed to the IRS and when.

So Jack, what with you teaching tax law and all, could you point out the places where he cheated?

After all, I'm sure that you're familiar with the quote from Justice Learned Hand about how no one is required to pay even a dime more than they legally owe.

I'm equally sure that he didn't do his taxes via TurboTax like our esteemed Treasury Secretary. I'm sure his taxes were done by high powered tax attorneys. Maybe even some that you trained.

I haven't heard anyone here or in the media accuse Romney if cheating. It seems most people talking about Mitt's returns have a problem with a system, put in place by wealthy members of congress, that allows a mega millionaire to pay a much lower rate than us working stiffs.


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