The response to Romney’s admission of a 15% tax rate
In South Carolina yesterday, Former Massachusetts governor Mitt Romney, the front runner in the GOP presidential primary, said that he pays taxes “close to the 15% rate.” This statement was made after Romney rejected calls from former House Speaker Newt Gingrich and Texas Gov. Rick Perry to release his tax returns now so that South Carolina voters know the details before Saturday’s primary.
The acknowledgment by Romney, whose fortune is estimated to be as much as $260 million, that he “overwhelmingly” makes much of his income from investments is significant because investment income is taxed at a lower rate than wages and salary.
“The last 10 years, my income comes overwhelmingly from investments made in the past, rather than ordinary income or rather than earned annual income,” Romney said. “I got a little bit of income from my book but I gave all of that away. And then I get speaker’s fees from time to time, but not very much.”
The top federal tax rate for investments is 15%, while the top tax rate for wages is 35% on taxable income over $388,350. Wages are also subject to Social Security and Medicare payroll taxes.
According to the Tax Policy Center, a Washington think tank, projects households making $50,000 to $75,000 will pay an average effective income tax rate of 5.7% this year. When payroll and other taxes are included, that same household would pay an average federal rate of 16.6%.
The Obama campaign moved quickly to try to capitalize on the buzz surrounding this issue. White House Press Secretary Jay Carney told reporters that Obama believes wealthy Americans “should not pay a lower effective tax rate than middle-class Americans. Everybody who’s working hard ought to pay their fair share, and that includes millionaires who might be paying an effective tax rate of 15% when folks making $50,000 or $75,000 or $100,000 a year are paying much more,” adding that Obama “thinks we ought to fix that.” When a reporter noted Romney was following the law, Carney responded: “The president believes we ought to change the law, for that reason.”
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Hey Matt. Shouldn't it be reversed? It seems like it takes a lot less effort to invest than it takes to earn wages. Of course middle class Americans could invest their money as well, taking advantage of the current lower tax rate on those investments, but many can't afford to do so.
please remember that corporate profits/income from which dividends are dispersed are already taxed prior to the distribution of the dividends, so essentially the 15% tax is double taxation. the effective tax is much higher than 15% regardless of what an individual's tax return indicates.
change the tax rate so it is at least the same, investment or working for your income and change right now. so everyone is equal not rich paying less than working class, if obama would change it now he would get reelected in 2012.
$50k-$75k pay an effective tax of 5.7%? Someone ought to inform the IRS they have been over taxing us. That number is bogus!
2012 IRS tax rates for single $35k-$65k puts you in the 25% bracket, I know we have deductions but I don't know how one can get down to an effective tax of 5.7% unless you have 5-6 kids, pay alamony and child support , have a huge mortgage, car payments and are paying for your triple bypass heart surgery and false teeth for your wife and all your kids?
The money that is invested has been taxed at some rate already, then it is saved or put to work in various investments. If the government starts taxing investment gains at a higher rate, watch the rate of investment/growth drop. If someone other than yourself is making money, as long as they are not stealing from you, it does not hurt anyone else in any way. Is the public being envious a reason to let the government take money from people?
They should probably add payroll type taxes to investment income but the 15% tax rate seems reasonable.
Hi Matt,
Great QUESTION!
SOLUTION is really simple: Call & Write congress to support the FairTax Plan & to vote:
FairTax Act (HR 25, S 13)
What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.
The FairTax Act (HR 25, S 13) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.
The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
Consider checking out this website & study ALL details BEFORE making opinions. http://www.fairtax.org/site/PageServer
Jay Carney would do best to keep his opinions to himself BEFORE making flippant & baseless remarks.
Savings investment, real estate investment, and investment in our Corporations is important to our Country. Citizens should be encouraged to save and invest for many reasons. There is risk involved, maybe not for bank savings, but for investment in bonds, real estate, and stocks. There should be some tax incentive.
Tax laws need to be made much simpler, loop holes and special treatments done away with. Changes should be made so Corporations could bring their money back into the United States without suffering so deeply financially. What benefits most of our Corporations and investors, minus the loop holes, benefits the American people.
How does he get his taxable income down to a 15% rate when his income from speeches alone was 375,ooo???…donated income from book to offset the income from speeches I suppose …and then "ate" the dividend taxes…he must be a 1%er or at least close
The capital gains rates and dividend rates were lowered when the republicans had control of both houses of congress and George W. Bush was president. It doesn't take a rocket scientist to see that was a payback to the moneyed people that by and large put those people in office. No way should investment income be taxed at a lower rate than income from wages.
national retail sales tax doesn't do anything but amplify the problem, it makes the assumption that you buy an amount of goods relative to your income- if you make a mil or if you make 20k per year you still only buy one pack of socks from walmart each year- the ' fairness ' tax assumes the guy that makes a mil would buy 50 packs each year..it does nothing but give the rich another way to be taxed less relative to their incomes…with respect to retail sales, the poverty stricken spend all of their money on goods while the 1%ers spend a puny fraction of their incomes on goods
I don't think its simply 'up to' Obama…thats why we had thee big stinks over the budget 3 times in 2011…the redumbicans won't let it happen
I for one am really interested in seeing this dude's taxes…the Mormon church expects their members to pay 10% of their income tithing to the church each year…I wonder if the amount he tithed to the church jives with the amount he claimed as income???. .. did he include the dividends as his income to be tithed??? maybe so and maybe that is how he wrote off so much of his real income to get to an effective 15% rate or maybe he just has so much carry forward in charity and etc???
To be fair They should also ask him how much money in taxes the companies he controls pay
Neighbour
I need eery dollar I 'earn' to live on. That includes Social Security a bit of free lance And tax bracket is in the low teens as well. I have lots of Capital losses to offset gains. I take losses as the stocks that lose last in a down turn are not typically the ones that gain first. Change the tax law and strategy and tactics will change as well.
I am moneyed to some people who don't have as much. I simply would not invest if you (the Government) tried to take more from me in taxes. When Germany and Japan were kicking our economic asses in the 1980's their CapGains rates were 0% and 1% . Not so any more. Eliminate the incentive to invest and the little guy working will be hurt more – I already have money!
I agree with Mitt Romney on the tax level existing and applying for investment as different
for other items on payroll, healthcare etc.
I believe the other candidates are using a dirty game against Romney not by economic
arguments or political questions on the basic national and international interest of the country.
Thank you
Best regards
Rubén Marty M
Engineer MBA
Well gee a person who does not have a regular job but lives off his investments pays the rate that investments are taxed at. Big news and no surprise.
Now I used to make about 80K per year, took the standard deduction and paid 10%. Now I did use the 401K program extensively, but folks who make that much should also.
Of course dividends should be taxed less as they have already (somewhat) been taxed as corporate income. In fact I could argue that they should be taxed at 0% if they come from current corporate income.
thats rigt stu. the house republicans will not tax the rich, for they are owned by the rich. hell, they are the rich. think they will tax themselves?
I know this sounds surprising that Mitt is paying only 15 % in taxes while we the wage earners pay almost double that in taxes. Mitt is not to be blamed for legally using the available legal ways to pay less.
don’t you think that a flat tax makes sense for everybody where everybody pays the same % of tax irrespective of their earnings.
this probably is the only fair way of paying fair taxes.
I really don't care what Romney pays. For years I have had an effective tax rate under one percent due to investments. Do I feel bad about it. No. Am I glad he is at 15% yes.
If your so glad to pay higher taxes and not pay attention to what is available maybe you should be paying over 50% for being naive.
Remember, Socialism is great until you run out of other peoples money.
I have never made more than $75000 in any of my 30 year career and have never even come close to paying less than 27% in taxes. What planet do you live in, Matt?
1. I did not notice any mention in the article of the "carried interest" loophole that allows some people to have earned income taxed as capital gains. Many have suggested that much of Mr. Romney's "interest income" is actually deferred wages or ongoing compensation from Bain, which this tax loophole allows to be taxed at the lower rate
2. You mention that he stated "And then I get speaker’s fees from time to time, but not very much.” In Mr. Romney's case, "not very much" is about $375,000.00 in a year. That may be "not very much" in Mr. Romney's world of inherited wealth, "carried interest", and a tax system skewed to the rich people who designed it. In my world, and in the world of most Americans- $375,000.00 is a who-o-o-o-ole lotta dough.
3. One positive result of the current conversation is that it takes attention away from discussing wealth exclusively in terms of tax brackets for particular levels of earned income and broadens the discussion to include all income. 10 buck of capital gains gets you into the movie theater just as surely as 10 bucks worth of a working man's wages.
Sorry for having to post 3 posts – the web site would not accept it as 1 post.
Everyone seems to be missing the point that inorder to receive a CAPITAL GAIN, the investor has to be taking personal RISK !!! There is absolutely no guarantee anyone will have a gain. It could be a Capital Loss.
The lower tax rates are to encourage people to take such risks.
It's not double taxation because you are only taxing the income generated from the investment and not the investment itself.
It looks like I have been over charged for my taxes because I pay more than that.
Wages for Payroll taxes are capped at $110,000. In other words anyone making over 110,000 does not have to pay Social Security tax on that income. That's how Bob Dole (R) Kansas and President
Reagan saved Social Security in 1983. In reality they saved the Rich from paying Social Security Taxes. However for decades Society Security has been running a surplus of about $ 68 million dollars a year (until recently) which goes directly into the General Fund in the IRS. Pres. Clinton used the Social Security surplus in the 1990's after Wall Street crashed Mexico's economy as a result of NAFTA.
I am !00% for the fair tax. I know CPA's and tax attorneys aren't because it would put most of them out of business. Almost 50% of the public pays no income tax. Some even get money back that they didn't pay. This is crazy. Everyone should pay some income tax. With the fair tax they would.
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