by Clyde Weiss | January 25, 2012
Tuesday night, addressing the nation in his State of the Union speech, President Obama called on the wealthiest Americans to pay their fair share of taxes.
Proof that they often don’t is found in GOP Presidential candidate Mitt Romney’s federal tax return for 2010 – which he only reluctantly agreed to release under pressure from Newt Gingrich, his rival for the GOP nomination. The tax papers, released yesterday, showed he and his wife paid an effective tax rate of just 13.9 percent on taxable income of $21.7 million. Is that fair?
Since more than half of his earnings are considered capital gains and dividends, they are taxed at a top rate of 15 percent. But for those of us whose income is derived from actual work – called ordinary income – the top federal tax rate is 35 percent. Romney calls it “entirely legal and fair.”
Legal? Perhaps – but why should investment income be treated differently than ordinary income?
“The most affluent Americans in recent years have pulled away from the rest of us, and the reason is at least in part that they are able to compound their wealth at very, very low tax rates,” University of Southern California law professor Edward Kleinbard says in a recent article in Bloomberg. “Romney’s tax return, with its heavy reliance on income taxed at low capital gains rates, demonstrates that.”
If Newt Gingrich had his way, he’d entirely eliminate taxes on investment income (stock dividends and capital gains). Under that plan, Romney said during the Jan. 23 GOP presidential debate in Tampa, “I’d have paid no taxes in the last two years.”
Even a senior adviser to Romney realized the unfairness of that approach. Stuart Stevens, quoted in a story in The Washington Post, says, “Governor Romney thinks that’s unfair.”
So do we. The current tax code is unfair to the working middle class – a group that at least some in the GOP Presidential field would like to argue doesn’t even exist. We don’t need to keep enriching the richest 1 percent. We need to help the 99% whose spending is the engine of our economy.
“We need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share,” President Obama said in his State of the Union speech. He went on to explain:
“Tax reform should follow the Buffett Rule. If you make more than $1 million a year, you should not pay less than 30 percent in taxes. And my Republican friend Tom Coburn is right: Washington should stop subsidizing millionaires. In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn’t go up. You’re the ones struggling with rising costs and stagnant wages. You’re the ones who need relief.”
Gingrich and Romney call this talk of fairness and economic inequality “class warfare.’ Obama had this to say about that:
“Now, you can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.”