One political ad I recently watched quoted Mr Romney's effective tax rate at 14% and asks the question of its fairness when compared to someone who makes $50,000 a year and pays a higher rate. For the sake of argument I will use 20% for someone much like myself (an average voter) making that $50K a year.
It seems to me the ad is misleading when it neglects to compare "tax burden" or the percentage of overall tax paid by both the very wealth and the average citizen in terms of actual dollars.
Mr Romney had $20,000,000 of taxable investment income last year and paid $280,000...oops... (Derf corrected me here...$2,800,000) in taxes or 14% of the $20M. I paid 20% of $50,000 or $10,000 mainly on earned income, not investment income. Collectively we paid $2,810,000. Mitt contributed 99.5% of the collective tax burden...my contribution was just 0.5%.
Remember, you can't pay income taxes until you have earned income in someway. Earning usually means you work for it or you take savings and invest in others who produce goods or services. Mr. Romney does the second almost exclusively. His lower rate exists as a result of the federal government desire to encourage private investment (savings) in the overall economy. I see nothing wrong with this strategy especially given the riskiness of the markets today. In fact, many bond investors will realize that less market risk has been undermined by additional taxation (bond income is taxed as ordinary income).
Individuals as well as local and state governments have a responsibility to work within a balanced budget but, there is always additional assistance from the Federal government (its budget has no such rules). This is one of the main reason that at times of stress...a loss of a job, a loss of a community, a loss of the financial world...the federal government can step in and provide food stamps, unemployment benefits, disaster relief or TARP.
The Federal government's goal is a balance economy and that does not always translate into a balanced budget. A balanced economy means the encouragement of growth weighed against a whole host of negative factors that impact the natural and man made world.
The average voter will miss all of these facts and in some ways I think politicians like it that way.
Comments
That said; I don't believe the billionaire should have to apologize for using the system that is in place. I use as many deductions as I can myself.
http://www.rollingstone.com/politics/news/mitt-romney-s-tax-dodge-20121012
There's more articles of a similar vein there and if you doubt their facts or statements there is always Snoops.com or FactCheck.com to help you sort it out.
While we can argue the issues in all manner of ways at the end of the day I'm left wondering how someone (this includes many business companies as well) pontificates how much they love the USA, how much they care about the people who live here, yet justifies stashing money, profits etc., in Swiss bank accounts and other off-shore entities to evade paying a fair share to assist this country and the folks who helped make these things possible.
The system needs fixing and I can't for the life of me figure out how giving even more incentives and tax breaks to this group is going to do it.
http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829?link=mostpopular2
Thanks Mark...great article.
Bill Moyer's Oct 19, 2012 Plutocracy
To give them even more context, sure you pay 3.5% of the collective tax burden but at the same time with making $50k, you're only making 0.25% of what he is.
I understand there are tax incentives to encourage investments in companies and such but there are way too many loopholes for the mega-rich to just stash their money with little or no benefit except to those using them. I don't condemn Romney for using whatever legal methods that are out there for him to take advantage of; however some of them are not necessarily conducive to businesses or entrepreneurship as they are touted to be by some.
Nowhere is this more apparent than in investing. Consider a hypothetical case: "Investor A" earns 1% over a year on investments which totaled $1,000,000 at beginning of the period. For simplicity, let's assume a tax-sheltered account. (Romney's is reported to be In the mega-millions.) His 1% return results in a dollar gain of $10,000. In contrast, "Investor B" earns 6.5% on an initial investment of $100,000 over the same period. Investor B's dollar gain amounts to $6500 - about a third less than Investor A's. In dollar terms, Investor A would appear the better investor. Most assuredly he is not.
It's good to think in percentages when investing - especially with larger sums as in 401Ks. Otherwise, large numbers themselves can become intimidating and make it difficult to adhere to the best course.
Guess I'm being political but it is the season. Heck. Both sides suck. Got to go put on my Buffalo Bills shirt and turn on the TV.
Derf
Sooooo... when I hear some multimillionaire saying he or she has paid his/her "fair share" when I am 95% certain they couldn't have made the same money elsewhere, I look at them for what they are - very intelligent descendants of robber barons throughout the ages. I'd like them to be honest about it, but they aren't idiots. Then, neither am I.
I only respect the people who made their money inventing new devices or creating new art, literature, music or other things that make life worthwhile.
If others want to admire or apologize for these zero sum game theory winners, that's their choice; but I'm unlikely to buy your defense.
Thanks Derf...brain fart on my part...my original post has been corrected...what a difference a zero makes.
I saw a T-shirt that said -
Apparently I'm supposed to be more concerned with what
Mitt Romney does with his money
than what Obama does with mine
To try to get her back to investing, here's a Reuters article about the dead-heat race and possible outcomes - none of them pretty. Personally, am very concerned about the market impact a drawn-out post ecection process could bring. Time to lighten-up?
http://www.reuters.com/article/2012/10/19/usa-campaign-outcomes-idUSL1E8LJ8T420121019