A brief word about Mitt Romney's taxes

Rick Moran
Romney wasn't "pressured" into releasing his 2011 returns as some liberals are saying. It was his intent all along to release them.

Reuters:

Mitt Romney released his most recent tax return filing Friday afternoon, making public a second year of documents after months of criticism for failing to reveal his taxes.

The newest documents show that the GOP presidential nominee paid a 14.1 percent income tax rate in 2011, paying more in taxes than he was required to do by federal law, according to accounting firm Pricewaterhouse Coopers. The Republican opted to drive up his income tax rate by not claiming more than $1.75 million in deductions for charitable donations.

The decision to pay more income taxes than he is required to runs contrary to Romney's previous statements.

"If I had paid more than are legally due, I don't think I'd be qualified to become president," Romney said in an interview in July.

Romney's campaign acknowledged the discrepancy.

"Gov. Romney has been clear that no American need pay more than he or she owes under the law," a Romney campaign spokesperson said in a statement. "At the same time, he was in the unique position of having made a commitment to the public that his tax rate would be above 13%. He directed his preparers to ensure that he is consistent with that statement."

So Romney pays 14% of his income in taxes. But how much does he pay? What is the amount? Two thirds of the way into the article, we finally find out:

In 2011, Romney paid $ 1,935,708 in taxes for 2011 on $13,696,95 in income, most of which came from investments.

Mitt Romney paid nearly $2 million to the US government in taxes. His critics, working 50 years, won't pay anywhere near $2 million. Romney pays 4 or 5 times more in taxes in one year than most of his critics will pay throughout their entire lifetimes.

Does he pay enough? Matthew Yglesias:

But this is definitely an issue where the conservative position is in line with what most experts think is the right course, and Democrats are outside the mainstream.

The reasoning is basically this. You imagine two prosperous but not outrageously so working people living somewhere-two doctors, say, living in nearby small towns. They're both pulling in incomes in the low six figures. One doctor chooses to spend basically 100 percent of his income on expensive non-durables. He goes on annual vacations to expensive cities and eats in a lot of fancy restaurants. The other doctor is much more frugal, not traveling much and eating modestly. Instead, he spends a lot of his money on hiring people to build buildings around town. Those buildings become houses, offices, retail stores, factories, etc. In other words, they're capital. And capital earns a return, so over time the second doctor comes to have a much higher income than the first doctor.

So then there are too different scenarios:

- In the world where investment income isn't taxed, the second doctor says to the first doctor "all those fancy vacations may be fun, but I'm being much more prudent. By saving for the future, I'll be comfortable when it comes time to retire and will have plenty left over to give to my kids."
- In the world where investment income is taxed like labor income, the first doctor says to the second "man you're a sucker-not only are you deferring enjoyment of the fruits of your labor (boring) but when the money you've saved comes back to you, it gets taxed all over again. Live in the now."

And the thinking is that world number one where people with valuable skills take a large share of their labor income and transform it into capital goods is ultimately a richer world than the world in which such people just go out to a lot of fancy dinners.

If Romney was paying $2 million in taxes on $100 million in income, that would be cause for criticism. But $2 million paid on $14 million in income sounds more than adequate and any fair minded American would agree.






Romney wasn't "pressured" into releasing his 2011 returns as some liberals are saying. It was his intent all along to release them.

Reuters:

Mitt Romney released his most recent tax return filing Friday afternoon, making public a second year of documents after months of criticism for failing to reveal his taxes.

The newest documents show that the GOP presidential nominee paid a 14.1 percent income tax rate in 2011, paying more in taxes than he was required to do by federal law, according to accounting firm Pricewaterhouse Coopers. The Republican opted to drive up his income tax rate by not claiming more than $1.75 million in deductions for charitable donations.

The decision to pay more income taxes than he is required to runs contrary to Romney's previous statements.

"If I had paid more than are legally due, I don't think I'd be qualified to become president," Romney said in an interview in July.

Romney's campaign acknowledged the discrepancy.

"Gov. Romney has been clear that no American need pay more than he or she owes under the law," a Romney campaign spokesperson said in a statement. "At the same time, he was in the unique position of having made a commitment to the public that his tax rate would be above 13%. He directed his preparers to ensure that he is consistent with that statement."

So Romney pays 14% of his income in taxes. But how much does he pay? What is the amount? Two thirds of the way into the article, we finally find out:

In 2011, Romney paid $ 1,935,708 in taxes for 2011 on $13,696,95 in income, most of which came from investments.

Mitt Romney paid nearly $2 million to the US government in taxes. His critics, working 50 years, won't pay anywhere near $2 million. Romney pays 4 or 5 times more in taxes in one year than most of his critics will pay throughout their entire lifetimes.

Does he pay enough? Matthew Yglesias:

But this is definitely an issue where the conservative position is in line with what most experts think is the right course, and Democrats are outside the mainstream.

The reasoning is basically this. You imagine two prosperous but not outrageously so working people living somewhere-two doctors, say, living in nearby small towns. They're both pulling in incomes in the low six figures. One doctor chooses to spend basically 100 percent of his income on expensive non-durables. He goes on annual vacations to expensive cities and eats in a lot of fancy restaurants. The other doctor is much more frugal, not traveling much and eating modestly. Instead, he spends a lot of his money on hiring people to build buildings around town. Those buildings become houses, offices, retail stores, factories, etc. In other words, they're capital. And capital earns a return, so over time the second doctor comes to have a much higher income than the first doctor.

So then there are too different scenarios:

- In the world where investment income isn't taxed, the second doctor says to the first doctor "all those fancy vacations may be fun, but I'm being much more prudent. By saving for the future, I'll be comfortable when it comes time to retire and will have plenty left over to give to my kids."
- In the world where investment income is taxed like labor income, the first doctor says to the second "man you're a sucker-not only are you deferring enjoyment of the fruits of your labor (boring) but when the money you've saved comes back to you, it gets taxed all over again. Live in the now."

And the thinking is that world number one where people with valuable skills take a large share of their labor income and transform it into capital goods is ultimately a richer world than the world in which such people just go out to a lot of fancy dinners.

If Romney was paying $2 million in taxes on $100 million in income, that would be cause for criticism. But $2 million paid on $14 million in income sounds more than adequate and any fair minded American would agree.