The Romney campaign is still refusing to release any more tax returns but Romney is offering up a little information about the rate he paid in federal income taxes. Assuming he’s telling the truth, he says he never paid less than — wait for it — 13 percent.
Mitt Romney told reporters on Thursday that he paid at least 13 percent in federal income taxes each of the last 10 years.
“I did go back and look at my taxes and over the past 10 years I never paid less than 13 percent,” Romney said to reporters at a press availability in South Carolina, according to a pool report. “I think the most recent year is 13.6 or something like that, so I paid taxes every single year.”
Wow, 13%. Does he realize that this puts his income tax rate at less than the 2nd lowest rate paid in this country? Those who make between $8,701 and $35,350 pay a 15% rate, for crying out loud. And it’s less than half what I paid, and I’m hardly a rich man. The marginal rate for his income bracket is 35%, but since almost all of his income comes from investments rather than earnings, his baseline rate is only 15%. Which means he really isn’t writing much off to get to 13% or more. But that difference between the capital gains rate and the top marginal rate means he is paying a lower rate than those who make under $35,000 a year. And under the Ryan plan, his taxes would drop to almost zero and those making under $35,000 would see their taxes go up.
42 comments
Skip to comment form ↓
eric
August 20, 2012 at 12:05 pm (UTC -4) Link to this comment
And remember kiddies, conservatives tax income from labor at 2.5x the rate of income from savings because they are the party that values hard work.
ArtK
August 20, 2012 at 12:09 pm (UTC -4) Link to this comment
This just extends the evidence that Romney is disconnected from reality and entirely tone-deaf. The idea that this information is a positive thing is what stuns me.
Hmmm… maybe it doesn’t stun me at all. What makes me sad is that there are tons of people who pay upwards of 25% of their income in taxes who will read this and say “See, he’s not hiding anything. He pays his taxes!”
sceptinurse
August 20, 2012 at 12:09 pm (UTC -4) Link to this comment
Sheesh, I didn’t pay 13% when I was a single mother with a $5.00 and hour job.
Reginald Selkirk
August 20, 2012 at 12:10 pm (UTC -4) Link to this comment
Are we talking just federal income tax, or federal + state, or federal + state + FICA?
busterggi
August 20, 2012 at 12:10 pm (UTC -4) Link to this comment
Considering that he lied about having paid taxes as a Massachusetts resident when he ran for governor of that state – no I won’t take his word for it.
Randomfactor
August 20, 2012 at 12:11 pm (UTC -4) Link to this comment
The question is, what ELSE is he hiding in those tax returns? The question with rMoney is never “is he lying,” but always “WHAT is he lying ABOUT?”
Gregory in Seattle
August 20, 2012 at 12:11 pm (UTC -4) Link to this comment
How much he paid “at least” isn’t the question. But then, Romney isn’t know for actually answering questions.
d cwilson
August 20, 2012 at 12:14 pm (UTC -4) Link to this comment
Well, I guess we should just take his word about the 13% then. I mean, it’s not like Romney has a long history lying, right?
ArtK
August 20, 2012 at 12:14 pm (UTC -4) Link to this comment
@eric
Yes, but you see, counting all your money is the ultimate in hard work. Signing documents is very stressful. The decision on whether to outsource to China, Mexico or India keeps these guys awake at nights.
Reginald Selkirk
August 20, 2012 at 12:22 pm (UTC -4) Link to this comment
The hardest work is choosing the right parents to be born to.
TGAP Dad
August 20, 2012 at 12:23 pm (UTC -4) Link to this comment
I’m reminded of Nixon assuring us there was nothing on the tapes to indicate wrongdoing. Then HE helpfully supplied the transcripts to “prove” it. Then the ACTUAL tapes were finally handed over, because they’re were subpoenaed, and showed that he lied. And then we found out that Rose Mary Woods was a contortionist who could hold a pose for 18 and a half minutes. The point is that he told us one thing refused to release the supporting documentation, and was found to have been lying about the whole thing. This appears to be the pattern employed by Romney. His continuing evasiveness follows the Nixon pattern. I just wonder who his Rose Mary is going to be. My guess is some lowly accountant.
lofgren
August 20, 2012 at 12:37 pm (UTC -4) Link to this comment
I’d like to know what Romney would personally do in order to create more jobs if he paid less taxes.
I mean, that’s the whole argument, right? If he pays less taxes, then he will spend more money which will create jobs. How many people does he employ? How many people would he employ if he paid fewer taxes? It’s not like he has no money right now, in fact he has enough money to afford pretty much anything he could possibly want. So why is he restraining himself from spending money and why would he suddenly start spending it in massive amounts if he paid slightly less taxes? When I get my tax rebate check, I don’t go out and spend 10x the amount that I got back, but that is the kind of spending he and his fellow 1% would have to engage in if they were to have a noticeable effect on the economy. And they would have to keep spending it, year after year, or else all those new jobs they somehow created would dry up almost instantly.
Zinc Avenger (Sarcasm Tags 3.0 Compliant)
August 20, 2012 at 12:38 pm (UTC -4) Link to this comment
For a given value of “paid”, “percent”, and probably even “13″ that might not be the same as your definition.
Jordan Genso
August 20, 2012 at 12:50 pm (UTC -4) Link to this comment
I wonder if the “Taxed Enough Already” crowd feels that 13% is “Taxed Enough”?
That is why Mitt Romney’s tax returns matter. When one party is making a blanket statement that you can’t raise taxes on the wealthy, then we should see how the wealthy currently pay taxes.
This election should be between those who feel that the wealthy paying 13% is “enough” (meaning that any deficit must be solved by cutting spending, since we can’t ask the wealthy to pay more than 13%), and those who feel that 13% needs to be higher before we dismantle important public services.
Randomfactor
August 20, 2012 at 12:54 pm (UTC -4) Link to this comment
For a given value of “paid”, “percent”, and probably even “13″ that might not be the same as your definition.
And, probably, “taxes.” Wouldn’t be surprised if he added in sales and property taxes to make 13 percent.
Area Man
August 20, 2012 at 1:16 pm (UTC -4) Link to this comment
“Are we talking just federal income tax, or federal + state, or federal + state + FICA?”
I’m guessing he’s talking about federal income taxes. But it’s worth noting that he pays probably close to 0% FICA, because he’s not a wage earner, and those taxes don’t apply to income over $150k, or something like that. As for state income taxes, they are usually pegged to federal taxes, but lots of states don’t have an income tax. And I honestly have no idea what state Romney pretends to reside in.
Paul
August 20, 2012 at 1:26 pm (UTC -4) Link to this comment
With rounding, it could pretty easily be accounted for just by subtracting the 10% he’s obligated to provide the Mormon Church. Oh, and we already know about the dressage write-off.
Is there a reason why capital gains isn’t progressive in the same manner as wage taxes? Say 15% for the first couple hundred thousand so you’re not hurting the average person or their retirement plan, and charge them at or near their marginal wage tax rate above that (or even something lower, like 30%).
Hell, you’d think if “trickle-down economics” is a real thing, you wouldn’t want to give the rich people who are supposed to do the trickling incentive to save their money.
I really feel like I must be missing something. Well, aside from rich people buying laws to suit them, but there must have been some sort of justification/rationalization provided at some point, if only to calm down the proles.
d cwilson
August 20, 2012 at 2:09 pm (UTC -4) Link to this comment
Many of them feel that anything over 0% is too much. Especially if any of that money might benefit someone who isn’t a Real American ™.
Mark Sherry
August 20, 2012 at 2:14 pm (UTC -4) Link to this comment
Long-term capital gains are taxed in a semi-progressive manner. The problem is that there are two brackets, and they’re based off of what your top bracket of regular income is. If your regular income is below $33k (i.e. your top marginal rate is 15%), you pay 0% on capital gains. Any more than that, and it’s a flat 15%.
Here in Soviet Canuckistan, only half of one’s capital gains are taxed, but they’re taxed as regular income. E.g. $100k of capital gains counts as $50k of income for taxation purposes. Interest is taxed as 100% income, and dividends are… complicated.
Area Man
August 20, 2012 at 2:42 pm (UTC -4) Link to this comment
“Those who make between $8,701 and $35,350 pay a 15% rate, for crying out loud. And it’s less than half what I paid, and I’m hardly a rich man.”
I suppose I should point out that the marginal tax rate applies to Adjusted Gross Income, which is what you’re left with after taking out deductions and the personal exemption. Even with the standard deduction (not itemized) and the exemption, a single person without children gets just shy of the first $10,000 untaxed. A person making $8701 almost certainly does not have a net positive income tax bill, although he or she will pay the 7.65% in payroll taxes no matter what.
Eric Ressner
August 20, 2012 at 2:47 pm (UTC -4) Link to this comment
Paul @ 17:
That would make sense, wouldn’t it.
Note, though, that your “average person” receiving retirement benefits is taxed at the earned income rate, not as capital gains or dividends, even though most of the money in her retirement account (401k, IRA, etc) is capital gains and dividends. (I hope that doesn’t put an unexpected crimp in your retirement plans.)
Area Man
August 20, 2012 at 3:11 pm (UTC -4) Link to this comment
Retirement plans already get highly preferential tax status. If that were the problem, then problem solved.
There are a few legitimate reasons for taxing capital gains at a lower rate, having to do with inflation and “bunching” the income into a single year, but these issues can be dealt with on their own terms. Otherwise, there is no sound reason for giving capital gains preferential treatment, it’s just another way to give rich people a tax cut.
I must say that I don’t really care too much that Romney pays such a ridiculously low tax rate on his massive income that he gets for sitting on his ass; it’s not a moral failing on his part that this is how the system is set up. What is a moral failing is trying to make the system even more friendly to the unproductive rich than it already is, and expecting the rest of us pay for it and grovel with gratitude at their awesomeness.
whheydt
August 20, 2012 at 3:13 pm (UTC -4) Link to this comment
My first question about his answer (and one would need to see the tax return to know) is:
What is that 13% OF? It is very unlikely to be 13% of gross income (which is what most people would claim their “tax rate” represented). If it’s 13% of net taxable income, both the amount he’s paying it on and the actual rate become of interest.
The 13% *could* be used to imply that his net taxable income is on the order of 30K…which is ridiculously low for a man of his wealth.
–W. H. Heydt
cjcolucci
August 20, 2012 at 3:20 pm (UTC -4) Link to this comment
My federal income taxes, leaving aside everything else, have never been as low as 13%.
wscott
August 20, 2012 at 3:34 pm (UTC -4) Link to this comment
No, that’s reduced from his Adjusted Gross Income not from the taxes he pays. If I donate $1000 to charity, that reduces my taxable income by $1000 – my tax burden is reduced by [tax rate] * $1000.
Bingo. The actual tax rate is meaningless unless you see how much income has been excluded from being counted. (Hint: I’m guessing it’s a lot!)
Lies, damn lies, and tax accounting…
eric
August 20, 2012 at 3:35 pm (UTC -4) Link to this comment
Eric Ressner @21:
Let me see if I’ve got this straight. Not only are investments taxed at a lower rate, but the sorts of investments that the lower and middle classes most often make are taxed at a higher, labor-like rate. Is that correct?
Mark Sherry
August 20, 2012 at 3:55 pm (UTC -4) Link to this comment
I don’t know if it’s the same in the US, but in Canada most investments for retirement are made through a Registered Retirement Savings Plan (RRSP). I believe these are similar to the US IRA. On the year that an RRSP contribution is made, the amount of the contribution doesn’t count toward one’s taxable income, potentially giving the investor a tax refund, depending on how withholdings were set up.
When drawing from an RRSP, the withdrawal is counted and taxed as 100% income, regardless of whether the money came from interest, dividends, or capital gains. This can also reduce means-tested benefits, like old-age security. Depending on what expects one’s post-retirement income and benefits to look like, it can be better to make your retirement investments outside of an RRSP.
(Roth IRAs work differently; contributions aren’t deductible, and withdrawals are (usually) not taxed. I am not a financial advisor; this is not financial advice.)
lordshipmayhem
August 20, 2012 at 4:33 pm (UTC -4) Link to this comment
Area Man @ #16
I believe he’s pretending to live in a state of reality. Aside from certain members of the Republican Party (and especially members of the Tea Party movement), he’s fooling nobody.
vmanis1
August 20, 2012 at 4:35 pm (UTC -4) Link to this comment
Being a Canadian as well, I’m not too up on the rules about IRAs. However, I believe that there’s a maximum contribution limit of $5000/year (according to Wikipedia; IRA limits were lower than that until very recently). So, since Mitt has an IRA with a current balance of something like $100 million, he has apparently been contributing for approximately 20,000 years, or about 15,000 years before the Beaker People began flourishing in Western Europe. (Who knew that Neolithic culture had developed retirement savings schemes?)
If the balance doesn’t come from contributions, it must come from investment yield. A bit of arithmetic suggests that this could only come about if all of the account’s investments produce astronomical yields. But if that were true, Bain would own the whole world, thanks to Mitt’s financial wizardry.
Now there may be plausible explanations for this balance; for example, he may have transferred eligible balances from other compatible kinds of retirement accounts into this IRA. However, it certainly seems peculiar on the face of it. It’s an example of why it’s so difficult to take any statement Romney makes as being the pure unvarnished truth.
yoav
August 20, 2012 at 4:57 pm (UTC -4) Link to this comment
As Lawrence O’Donnell keep pointing out almost daily, Mittens is very careful to never specifically mention federal income taxes which led him to the conclusion, I find rather reasonable, that he was paying much less in income taxes.
Mark Sherry
August 20, 2012 at 5:13 pm (UTC -4) Link to this comment
Astronomical yields are a bit simpler when you can control the pricing of the shares you sell to yourself. The WSJ has an article describing how employees would buy amounts of high-risk Class A stock which could have yields as high as 3320%. (By contrast, the Class L stock also sold to employees and coinvestors might only yield 100%.) All investors, employee and otherwise, would receive both class A and L shares, but employees could directly add them to their IRAs.
Doug Little
August 20, 2012 at 5:44 pm (UTC -4) Link to this comment
Maybe Mitt can get some of his buddies to hold him down and cut it for him.
Doug Little
August 20, 2012 at 5:45 pm (UTC -4) Link to this comment
Oops wrong thread ignore above comment, Sorry
Azkyroth, Former Growing Toaster Oven
August 20, 2012 at 6:10 pm (UTC -4) Link to this comment
Maybe he really means he never paid less than $13.
I mean, the keys are right together…
Marcus Ranum
August 20, 2012 at 7:02 pm (UTC -4) Link to this comment
I’m still puzzled at how he’s able to write of $75,000 for his wife’s hobby. Can I write off my beer-drinking and porn collection, Mitt?
Marcus Ranum
August 20, 2012 at 7:03 pm (UTC -4) Link to this comment
I believe he’s pretending to live in a state of reality.
No, he lives in a state of Convenience.
Modusoperandi
August 20, 2012 at 7:04 pm (UTC -4) Link to this comment
eric “Let me see if I’ve got this straight. Not only are investments taxed at a lower rate, but the sorts of investments that the lower and middle classes most often make are taxed at a higher, labor-like rate. Is that correct?”
Kind of a kick in the teeth, isn’t?
Michael Heath
August 20, 2012 at 8:15 pm (UTC -4) Link to this comment
Area Man writes:
“Few legitimate reasons” isn’t a very good way to determine the prudence of taxing capital gains equal to income. One would only need one monumental reason to not do so, like supporting a scheme which optimizes optimal economic growth, a healthy labor market, and an optimal trend in median discretionary income. All within the context of our living in a competitive and increasingly competitive global market where we can’t compete well on one major input: cheap labor, but can on another major input – capital investment.
ftfkdad
August 20, 2012 at 8:49 pm (UTC -4) Link to this comment
it is almost certain that he is telling the truth about how much tax he paid, but … (1) he may well have paid 13% tax as an averaqe over 10 years, so perhaps zero for several years and then a good amount of tax another year … so did not pay 13% each year. Perhaps this is what Reid means. More damaging, his tax returns could perhaps tell us that the man who will restore America to its greatness is the same man who bet, through his investments,against America. The same man who believes in America so much he kept a good amount of his money overseas (and away from American investments). The focus of this should not be on the tax rate itself but on what his tax returns will tell us about where and how he invested his money.
Area Man
August 21, 2012 at 12:13 pm (UTC -4) Link to this comment
Sure, but there’s no evidence that cutting the capital gains tax rate accomplishes any of that. What it does accomplish is to increase wealth inequality (for Romney/Ryan, this is a feature, not a bug) and cause an economic drag by encouraging tax avoidance schemes.
In principle, all forms of economic activity should be taxed equally, unless you can identify an externality that needs to be fixed. Otherwise, you’re just introducing economic distortions; like, for example, encouraging over-investment in the housing sector, which I seem to recall was an issue a few years back.
Michael Heath
August 21, 2012 at 6:53 pm (UTC -4) Link to this comment
Area Man writes:
I’ve never encountered an economist who claimed that tax scheme distortions was a primary root cause for the housing bubble. I have encountered economists who argued the root cause for the housing bubble was due to: a) incompetent monetary policy coupled to, b) investors looking to get out of the Internet bubble and into something perceived to a be a safer bet which delivered a steady cash flow, and c) a regulatory environment which didn’t force investment banks and insurance providers like AIG to hedge their plays; coupled to credit agencies who delivered AAA ratings to sub-prime bets.
I remain confident the U.S. has to exploit its competitive advantage in capital given our structural weakness on cheap labor.
Area Man
August 21, 2012 at 7:07 pm (UTC -4) Link to this comment
“I’ve never encountered an economist who claimed that tax scheme distortions was a primary root cause for the housing bubble.”
Of course I was oversimplifying for effect. I seriously doubt that the capital gains rate was a major factor in the bubble (though it was probably a minor one). A major factor however was an international savings glut that led to a search for “safe” assets in which to park all that money. Hence the mortgaged-backed securities and all the shenanigans that went with them. This was not a US-specific problem, but the point is that you can encourage too much savings and investment by skewing the incentives.