If you are a wealthy American who pays the top regular income tax rate of 35%, you have terrible, awful lawyers.
Mitt Romney does not have terrible lawyers.
The news of the day is that GOP frontrunner Romney released the previous two years of his tax returns. Romney’s 2010 adjusted gross income was $21,661,344. His estimated AGI for 2011 is $20,901,075. If all of that income was taxed at the highest tax rate, Romney would be paying around $7 million in federal taxes. But only true idiots and Republicans trying to scare people in election years actually believe that wealthy people pay anything approaching a 35% income tax in this country. Instead, Romney’s effective tax rate was about 14% in 2010 and is estimated to be around 15% in 2011. My effective tax rate was higher than Mitt Romney’s in 2010, and I don’t even get to like firing people.
But Romney is trying to spin his tax returns as an example of how “complicated” that tax code is. And the mainstream media is overwhelmed and helping to push that line. But these taxes are not complicated for a tax lawyer — and when you make $20 million a year, you can afford some good ones, so doing your taxes is about as complicated as writing a check for legal fees…
Bloomberg Businessweek has this money quote (no pun intended) from Romney:
The former private-equity executive and Massachusetts governor earned more than half of his income from capital gains and dividends, which are taxed at a top rate of 15 percent, rather than the 35 percent top rate for ordinary income. His campaign publicly released the returns today.
“Oh, I’m sure people will talk about it,” Romney said during a debate in Tampa, Florida, last night. “You’ll see my income, how much taxes I’ve paid, how much I’ve paid to charity. You’ll see how complicated taxes can be.”
Whatever, once you are making millions of dollars a year through various investment vehicles, your taxes are bound to become more complicated than a steelworker’s who is pulling down $50K and taking the standard deduction. That’s why millionaires hire lawyers. But what’s really galling about this “oh gosh, oh golly, we need a tax code average Americans can understand” is that the reason Romney’s taxes are so complicated is that people like Romney have been lobbying for loopholes that allow the richest men in America to pay an effective tax rate that’s lower than a legal blogger.
Something tells me that Romney would object to a “simplified” system where all adjusted gross income is taxed at the same rate, whether it be regular salary or proceeds from investments.
And anyway, it’s not like Romney or anybody as wealthy as he is needs to understand all the ins and outs of the tax code. He hires professionals to do that. We call them tax lawyers and they are often the smartest guys in the room. For Americans with means, it’s not “complicated” to hand over your investment portfolio — sorry, have your accountant hand over your investment portfolio — and tell your tax lawyers you will pay them as much as they want if they make it so you pay the federal government as little as possible.
If it appears that Romney filed every available form with the IRS, don’t worry, lawyers are very good at filling out forms.
An average American should look at these tax returns and be horrified that Romney paid so little. The media might look at these forms and be overwhelmed by its complexity. But a lawyer looks at these forms and says “good job.” The system we have, the system that many people want us to have, is one where the richer you are, the easier it is to avoid paying taxes on all of your money.
At least Romney pays some taxes. Last election cycle it seemed like every other Democrat just opted out of playing the tax game entirely.
Romney Paid 13.9% Tax Rate on $21.6 Million in 2010 Income [Bloomberg Businessweek]
Romney’s Taxes: $3 Million [Wall Street Journal]