A few days ago, The Atlantic noted that the multi-millionaire Mitt Romney would pay in taxes under the Paul Ryan budget. First, it should be noted that under the plan taxes on capital gains, interest and dividends would be axed. Capital gains means money made on investments (stocks, bonds, property). Interest is that money accrued in a money market fund, for instance, while dividends are simply payments made to stockholders by a corporation.
The majority of wealthy people—those like Mitt Romney—hold most of their wealth in capital gains, dividends and interest. Their net worth is largely created out of those numbers, not simply by how much money is in their checking account, which isn’t accruing interest.
According to the Atlantic’s number-crunchers, so much of Romney’s earning power comes from capital gains that Ryan’s plan would effectively bring his already-low 2011 tax rate of 15% down to under 1%—0.82 to be exact. ”Romney has structured his investments as ‘pass-throughs’ that avoid corporate tax. In other words, the 0.82 percent tax rate is really a 0.82 percent tax rate,” writes The Atlantic.
This is like the Buffet Rule in reverse.
If Romney would pay under 1% in taxes, it’s not so hard to imagine that many other wealthy members of society—the “heros” according to Ayn Rand and her acolyte Paul Ryan—are also similarly insulated from civilization’s parasites. The rich, as we have so often learned, are experts at hiding their money in various tax shelters.
With that sort of tax rate, one would expect Romney and the other wealthiest members of society to have been creating jobs left and right since 2007. So, where are the jobs?
Yep, they need more tax cuts of course to get those jobs flowing.
[Photo: AFP, Saul Loeb]
August 16, 2012 at 3:08 am, Eugene Patrick Devany said:
From Ryanomics to Romneyomics and Beyond Job Killing Payroll Taxes.
The payroll taxes could be replaced with a 2% tax on net wealth (excluding $15,000 cash and retirement funds). University of Chicago Economics Professor, Casey Mulligan, estimated in September 2011 that each, “percentage-point reduction in employers’ [payroll] costs raises employment by about a percentage point and real gross domestic product by about 0.7 percentage points”. Would Democrats like Mr. Obama oppose the tax? Would Republicans like Mr. Romney oppose the tax if it also meant that the income tax rate could be reduced to 8% and capital gains and estate taxes could be eliminated? Might both Democrats and Republicans agree that a matching 8% corporate income tax rate (down from 35%) and 4% VAT is business tax perfection? The answers are not simple and must be decided on facts.
Beginning with business tax reform, the 8% income tax rate is made possible by the 4% VAT -a tax used by every developed country except the U.S. Reducing the corporate rate would enable the return of several trillion dollars of tax deferred foreign profits. The low rate is also the only feasible political tradeoff for the elimination of all business tax expenditures (“loopholes”).
The obvious appeal of the individual tax reform includes: low 8% income tax rate (Republican), new broad tax base for Social Security and Medicare (Republican & Democratic), millions of new jobs with no government spending (Republican & Democratic), same low 2% net wealth tax & 8% income tax rates paid by rich and poor with no loopholes (Conservative), corrects the unintended wealth transfer of the current tax code (Socialist), improved upward economic mobility (Democratic), net wealth tax offset for debt such as mortgage, student loan, car loan, credit card, etc. (Libertarian), the blend of taxes would generate at least $500 billion more in tax revenue (but could easily be made revenue neutral). Now ignore the silly partisan labels.
The obvious hesitations about this tax reform include: the VAT is for Europe, Mexico and Canada (but see VAT supporter, Paul Ryan’s 2010 “Roadmap for America’s Future”), the net wealth tax is Un-American (see net wealth tax supporter, Donald Trump’s 2000 “The America We Deserve”), no politician has the guts to radically innovate by joining divergent ideas and ideologies (but see Bain Capital, Romney Care, Salt Lake City, Trump & Ryan), some very wealthy taxpayers may pay more (if you are very wealthy and can’t make money with an 8% income tax and no capital gains you deserve to pay more).
Let us know at TaxNetWealth.com if you can identify a logical, legal or economic reason why this 2-4-8 Tax Blend would not produce a sustainable economic recovery as promised. Otherwise, let your representatives in Washington know that you expect them to support bold tax reform or die trying by simply forwarding a copy of this comment.
Eugene Patrick Devany, JD, MPA.
August 17, 2012 at 6:20 pm, Rhonda Broussard Trahan said:
triclkle down economics doesn t work. if it did there would be no unemployment right now.