When they’re not insulting our NATO allies, the Republican “candidates” for President accuse Democrats of waging “class warfare”, and equate criticism of the vulture capitalist superwealthy with assault on free-market capitalism itself. They think that if they keep yelling “socialism” – an untrue charge that hasn’t stuck – that they can find electoral success, enabling them to further weaken the government they so detest.
The problem the Republicans have is that their frontrunner and presumptive nominee, former Massachusetts governor Mitt Romney, is the very embodiment of the vulture capitalist. But this week, it was revealed that Mitt Romney likely pays 15% or less on his income, most of which comes from investments, not work.
What this means is that if you earn a paycheck or own your own business and earn money from your labor rather than from investments, you probably pay a higher tax rate than millionaire Mitt Romney. The guy who owns this Belmont manse pays a 15% income tax rate, or possibly less.
No, this isn’t about class warfare. No one begrudges Mitt Romney his success at Bain Capital or his ability or right to buy and live in whatever type of home he wants and can afford. But we have a progressive tax code in this country, under which the wealthy pay more than those who are not. This is about fundamental fairness – that a person earning millions of dollars, taking advantage of tax shelters and loopholes custom-made for the superwealthy, by the superwealthy can pay a lower income tax rate than a physician or a teacher or a sales clerk is fundamentally unfair.
There’s a really good reason why Mitt Romney is reluctant to release his tax return – because it shows that he is taking advantage of a tax code in a way that the average American cannot. Someone who says $374,000 is “not very much” is, by definition, completely out of touch.
It also drew fire from the Democratic White House and other critics, who said it reflected how Romney, whose estimated net worth is $270 million, is out of touch with the experiences and concerns of typical Americans.
Romney, a former private equity executive and Massachusetts governor, seemed to feed that narrative on Tuesday. He said that he gets speaker fees “from time to time, but not very much.”
Annual campaign financial disclosure forms indicate that he was paid more than $374,000 in speaker fees from February 2010 to February 2011.
Romney’s estimate of his income tax rate suggested that like many of the wealthiest Americans, he could earn a large chunk of his income from investments – much of it in capital gains.
Because capital gains generally are taxed at 15 percent compared with the top income tax rate of 35 percent on ordinary wages, those with significant income from capital gains often pay lower tax rates than many Americans.
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His vast fortune is invested in dozens of funds linked to Bain Capital LLC, the powerhouse private equity firm he co-founded and led for 15 years. Several Bain funds have offshore connections and take advantage of tax breaks used only by the U.S. financial elite.
His tax returns could shed light on how Romney and Bain use offshore strategies to avoid taxes, said Daniel Berman, a former U.S. Treasury deputy international tax counsel and now director of tax at Boston University’s graduate tax program.
Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.
“Certain interests in foreign investment structures would have to be reported on attachments to his return,” Berman said.
On capital gains, Romney’s tax returns would not reveal any gains that he has not yet realized, even though those gains would be easy for him to lock in at any time, Berman said.
“I remember as a young lawyer being surprised to see tax returns of very successful investors showing net losses – because they were recognizing net losses” but not yet factoring in unrealized gains, Berman said.
Romney’s returns also might not spell out how much he benefits from a tax break used by private equity executives called the carried interest loophole.
This rule allows private equity and hedge fund managers to pay the 15 percent capital gains tax rate, rather than the top income tax rate, on a large portion of their earnings.
The economy is still reeling. People are earning less and working more. When it’s not acting out of noblesse oblige to grant average Americans a small pittance in tax relief, Congress is arguing over whether to do so for political reasons. It’s a time where the Occupy movement is giving voice to a lot of people’s concerns about money in politics – this isn’t going to fly.
Billionaire investor Warren Buffett, for example, has said he paid $6.9 million in federal income taxes on $39.8 million in taxable income in 2010, a rate of 17.4 percent. Buffett has said it’s unfair than his tax rate is lower than his secretary’s.
You’re damn right it’s unfair, and it’s something that ought to be fixed. Clearly, the guy who pays a 15% tax rate on his (mostly) investment income, and who thinks $374,000 isn’t a lot of money, the guy who was born into wealth and power and never lost it, has absolutely no clue – none – what it means to struggle. It’s as if contemporary Republicans are eager to abandon our great bourgeois revolution of the late 18th century and bring about a new sort of feudal nobility – a plutonomy of the rich, for the rich, and by the rich.
You and I? We don’t matter. We exist to be pandered to just enough to motivate us to become another slab of meat in a voting booth.
Had the Occupy movement not captured headlines, and had its messages not engendered sympathy from a middle class that has been systematically harmed by the axis of money and politics, then it’s possible that the Buffett Rule – a change to the tax code that would ensure that millionaires whose income comes largely from investments pay taxes on that money at a rate similar to that earned on other income, like business profits or regular wages. It’s named after Warren Buffett, the billionaire whose income comes largely from his myriad investments, who lamented that his secretary pays a higher tax rate than he.