Democrats are making a big deal of Mitt Romney’s taxes. Romney released his 2011 tax returns last week. They showed he paid $1.9 million in federal income taxes on an income of $20 million, a 14.1 percent rate. That is, his opponents are quick to point out, a lower rate than a person earning $50,000 a year would owe.
Romney’s rate was low because his income is from investments rather than salary. He told television reporters he thinks the lower tax on investment is both fair and good policy because it encourages investment.
He shouldn’t be criticized for taking advantage of the tax structure. He had nothing to do with passing those laws. It is both legal and moral to pay the lowest legal rate tax accountants can find. And if he has taken advantage of overseas tax havens over the years that were also legal, that’s OK, too. Those loopholes should be closed, but that’s for Congress to do.
But his insistence on defending tax laws that favor the rich and the super-rich while they reduce federal income invites argument.
U.S. income tax rates since World War II have gone from as high as 90 percent to today’s low. For decades, the top rate was 70 percent. That didn’t stop people like George Romney, Mitt’s dad, from investing their money in wealth-creating businesses. The top rate was also higher in the 1990s, a decade of spectacular investment and growth.
It simply is not true that higher tax rates will stop economic growth or, for that matter, that lower rates on investment income stimulates investment. If that were the case, then today’s low rates — which have been in place for over a decade — would have created an investment boom and there would have been no recession.
Both Romney and Obama should be advocating tax restructuring that will increase federal revenue while lessening the gap between income groups, similar to the recommendations made by the Simpson-Bowles Commission of 2010. Such a balanced approach would win the approval of thoughtful Americans and raise the level of trust in government and public officials.
Instead, Romney not only defends the preferential rate he pays on his huge income, he also advocates an across the board reduction of current rates, while President Obama asks for higher taxes on the rich but ignores the need to raise more revenue from the rest of the population in order to match income with essential spending.
Arithmetic has been declared dirty politics in the 2012 campaign.
— Emerson Lynn, jr.
