We are truly in a sad state of discourse about wealth in this country.
This is not a pro-Romney statement; it is an illustration of the idiotic narratives that run rampant these days. I’m just going to use Romney’s tax returns as an example but the same could be said about many of the “rich”.
This past week, Mitt Romney released his tax returns, disclosing that in the last two tax years he posted income of $42.5 million. During those years, he paid $6.2 million in taxes (excluding state, local, and property taxes), a rate of roughly 13.9% over these two years.
What was the story?
That Romney paid taxes at less a rate than Warren Buffet’s secretary did. Supposedly, she paid 35% but we don’t really know because after using her as a prop, Buffet now says that this is a “private matter” and she will not disclose her income.
Scott Johnson at Powerline writes:
We tried to back into an estimate of the income of Warren Buffett’s secretary, Debbie Bosanek, in “Analyze this.” Ms. Bosanek was one of the stars of President Obanma’s State of the Union address. Buffett and Obama portray her as the victim of an unfair tax code.
As I noted in an update to the post, it turns out that Ms. Bosanek reportedly makes about $60,000 a year. When they suggest that she pays 35 percent of her income in federal income taxes, Obama and Buffett are apparently taking her federal marginal tax rate, adding both sides of the payroll tax, and comparing it to what must be Buffett’s effective tax rate. Megan McArdle observed: “That comparison is beyond bizarre.” It is a farcical mistake to take anything these folks say at face value.
Buffetts’s hometown paper tried to follow up on the questions left hanging:
Debbie Bosanek and her boss both declined Thursday to disclose how much she’s paid, saying it’s private.
In an interview with The World-Herald, Buffett also said none of the online guesses about Bosanek’s salary is right, and the critics are missing his point.
“I’m saying she is being treated unfairly in the tax code, as are tens of millions of others, compared to me,” Buffett said. “They shouldn’t change the rates on all the other people. They should change mine.”
The pseudonymous Jim Treacher expertly translates: “No fair asking why we should take his word for any of this. No fair asking why, if he’s so worried about not paying enough taxes, he doesn’t pay the $1 billion — that’s $1,000,000,000 — he already owes. No fair. No fair. Shut up.” Citing Politico, Treacher adds that the White House isn’t much interested in exploring details either. Politico explains that “for the moment, the White House wants to keep the attention focused on Obama’s argument that it’s unfair to tax Buffett’s secretary at a higher rate than her boss.” My translation: The White House wants to keep the propaganda undiluted.
Romney is criticized for not paying more to fill to coffers to support government programs that care for the poor, the unemployed and the indigent (one would suppose that is the moral argument – at least it is implied) but what of that?
It seems that he also gave over $7 million over that same period to charity, primarily tithes to the Church of Latter Day Saints.
Doesn’t that qualify is helping the less fortunate? Giving back?
So out of Romney’s income, he has already paid $13.2 million to government and to charity – 31% of his income. Hardly the image of a cruel, selfish and heartless Republican.
Like many wealthy people, Romney’s income isn’t “income” in the sense that it is a paycheck, wages earned, it is interest and capital gains from investments – but Romney’s money just didn’t appear, he had to earn it at one time before he could invest it. That means that at one time his paycheck was taxed just like everybody else’s. When analyzed in this light, what is clear that he, and people like him are subjected to double taxation.
John Berlau and Trey Kovacs writing in the Wall Street Journal make a credible argument that Romney’s true tax rate over this same period is closer to 45%, not `14%:
When Mitt Romney releases his tax returns, as he is expected to do on Tuesday, thousands of green eyeshades will pore over every line. One of the most important revelations, however, may be overlooked. When double taxation of investment income is taken into account, Mr. Romney most likely underestimated his effective tax rate on the campaign trail.
The former Bain Capital CEO and Massachusetts governor caused a brouhaha last week when he estimated the tax rate on his investment income at 15%. “How unfair!” pundits exclaimed, noting that the top marginal rate for wage income is more than 30%.
The tax rate on investors is unfair, but for the opposite reason. Our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges is one of the highest in the world.
This is ironically the embodiment of the “corporate personhood” legal doctrine otherwise so decried by the left. The law taxes corporations as if they were separate beings from the shareholders who own them and then levies a separate tax on shareholder payouts and gains. This double taxation brings the effective tax rate on investment income to as much as 44.75%.
(Mr. Berlau is director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute, where Mr. Kovacs is a policy analyst.)
The final point is that Romney and the “rich” are being pilloried for managing their portfolios and tax liabilities according to laws that they had no hand in creating. To hear the left wail and whine, one would think that Romney just woke up one day and decided to pay 14% instead of 35%.
He didn’t. It would be stupid to pay one dime more than required – apparently even Warren Buffet agrees since that is exactly what he does with his personal fortune and is so aggressive in his business tax stance that his companies owe about a billion dollars in back taxes.
Mitt Romney’s tax returns tell us some things about him. They tell us a lot more about the sad state of the tax laws in this country.
When the candidate released his tax returns this week, the fact most noted was the low 14% effective tax rate paid by one of the wealthiest people in America, one with income of more than $20 million in both 2010 and 2011. Others were surprised to see how easy it was for Mr. Romney to effectively transfer millions of dollars each year to his children, tax-free, thus escaping estate and gift taxes.
But what really stands out is the mind-numbing complexity of tax laws, and about how hard it seems to have been for even the high-priced help Mr. Romney can afford to get things right.
In one case, the trustee for one of the Romney trusts sent two letters to the IRS electing to use an apparently irrelevant section of the tax code, and in the process misstated the facts involved.
That mistake did not affect the taxes owed, but another error was more significant. It appears that the return filed by that trust overstated capital gains realized by nearly $300,000, causing Mr. Romney and his wife to pay about $44,000 more in taxes than they owed.
“Progressives” never think what anyone who has more than they do pay enough – hell, not even the “progressives” who have the same or more think other people pay enough. They completely discount the amounts that the “rich” give to charity because in their minds the only charity that should exist is the government. It is interesting to note that 7 of top 10 wealthiest members of Congress are Democrats.
George Will, writing in 2008 about Arthur C. Brooks’ book, “Who Really Cares: The Surprising Truth About Compassionate Conservatism” noted that:
Brooks demonstrates a correlation between charitable behavior and “the values that lie beneath” liberal and conservative labels. Two influences on charitable behavior are religion and attitudes about the proper role of government.
The single biggest predictor of someone’s altruism, Willett says, is religion. It increasingly correlates with conservative political affiliations because, as Brooks’ book says, “the percentage of self-described Democrats who say they have ‘no religion’ has more than quadrupled since the early 1970s.” America is largely divided between religious givers and secular nongivers, and the former are disproportionately conservative. One demonstration that religion is a strong determinant of charitable behavior is that the least charitable cohort is a relatively small one — secular conservatives.
Reviewing Brooks’ book in the Texas Review of Law & Politics, Justice Willett notes that Austin — it voted 56 percent for Kerry while he was getting just 38 percent statewide — is ranked by The Chronicle of Philanthropy as 48th out of America’s 50 largest cities in per capita charitable giving. Brooks’ data about disparities between liberals’ and conservatives’ charitable giving fit these facts: Democrats represent a majority of the wealthiest congressional districts, and half of America’s richest households live in states where both senators are Democrats.
Will also notes the dearth of giving by high profile Democrats:
In 2000, brows were furrowed in perplexity because Vice President Al Gore’s charitable contributions, as a percentage of his income, were below the national average: He gave 0.2 percent of his family income, one-seventh of the average for donating households. But Gore “gave at the office.” By using public office to give other peoples’ money to government programs, he was being charitable, as liberals increasingly, and conveniently, understand that word.
It is comforting to see that trend continuing.
And what about President Barack Obama and Vice President Joe Biden in the run-up to their 2008 campaign?
USA Today broke it down here. In 2007, the Obamas gave more than $240,000 to charity, about 5.7 per cent of their income. The Bidens gave an average of $369 to charity a year for the decade before he moved to the Naval Observatory – about 0.3 percent of their income. Back in 1997, then Vice-President Al Gore and his then wife Tipper gave $353.
Since becoming Vice-President, Biden hasn’t become much more generous. In 2010, he gave $5,350, about 1.4 per cent of income. That same year, Romney gave some $3 million. The national average is about three per cent.
Remember that Romney gave 15% of his income to charity.
The lesson is this: when a “progressive” cries that the rich aren’t “paying their fair share”, it really means that they simply aren’t surrendering enough of their incomes to satiate their pathological “progressive” need to take your money and give it to someone else in exchange for power.
George Will noted this fervent belief in government and the supremacy of the welfare state:
While conservatives tend to regard giving as a personal rather than governmental responsibility, some liberals consider private charity a retrograde phenomenon — a poor palliative for an inadequate welfare state, and a distraction from achieving adequacy by force, by increasing taxes. Ralph Nader, running for president in 2000, said: “A society that has more justice is a society that needs less charity.” Brooks, however, warns: “If support for a policy that does not exist … substitutes for private charity, the needy are left worse off than before. It is one of the bitterest ironies of liberal politics today that political opinions are apparently taking the place of help for others.”
For “progressives” there is nothing but government…all else is illegitimate.
That is the real story of Mitt Romney’s tax returns.