Under pressure to release his tax returns, GOP frontrunner Mitt Romney did some expectations-setting this morning by admitting that his effective tax rate is “probably” close to 15 percent — far below the 23 percent rate paid by the average single worker.
Why so low?
As Romney explained, “ordinary” income doesn’t factor into his taxes much. “The last ten years, my income comes overwhelmingly from investments,” he said. And thanks to the 2003 Bush tax cuts, these capital gains are taxed at the low, low rate of 15 percent. (Note that Romney didn’t just profit from risking his own money; as a private equity titan, he continues to benefit from the “carried interest” loophole that allows mega-money managers to book their salaries as capital gains).
Romney does earn some income that’s taxed the old fashioned way, at 35 percent. But he’s evidently so wealthy that this money creates a rounding error in his tax rate. How rich is Romney? In the same speech this morning, he dismissed the more than $375,000 in speaking fees he took home last year — an amount that, of and by itself, would place him in the top 1 percent of income earners — as “not very much” money.
Romney’s rivals were quick to make political hay from his tax-rate admission. Newt Gingrich, who is supporting a preposterously low 15 percent tax on all wages, was first to pounce: “I assume this afternoon Mitt will endorse my flat tax proposal and have every American pay at the rate he paid,” Gingrich said, even offering to rebrand his proposal “the Mitt Romney flat tax.”
But what Gingrich neglected to mention is that his tax plan would actually zero out Mitt Romney’s tax burden. You see, Gingrich also wants to repeal taxes on investment income. Rick Perry, who calls Romney a “vulture capitalist,” would similarly reward his rival by ending federal taxes on capital gains. Ron Paul? He’s got the same proposal. (Rick Santorum, showing a modicum of restraint, merely seeks to reduce Mitt’s taxes by 25 percent.)
So here’s your modern GOP, ladies and gentlemen:
The frontrunner, a man whose given name is Willard (after his dad’s BFF, the hotel magnate J. Willard Marriott), possesses a fortune of nearly a quarter of a billion dollars, yet pays a lower tax rate than a bus driver. He says that anyone who criticizes this state of affairs is driven by “envy” and “class warfare.”
Meanwhile, his top rivals want to “reform” this situation so that Romney would pay no taxes at all. Plus, they all propose to let Romney pass those untaxed gains on to his heirs, also tax free — thanks to the repeal of the estate tax.
Did I mention that the Republicans have become the Party of the Rich?