The differences between Mitt Romney and President Obama are stark; one advocating for the advancement of all Americans, and the other for the further advancement of a few (see the different tax brackets below).
When Obama said, "I wasn't born with a silver spoon in my mouth", he wasn't attacking successful people or his fellow Americans as Mitt Romney had claimed, but was describing his own background.
Romney said on Fox News, "The president likes to attack fellow Americans. He's always looking for a scapegoat, particularly people who have been successful like my dad, and I'm not going to rise to that. I'm certainly not going to apologize for my dad and his success in life," and claimed his father was born poor (which was a lie).
And Mitt is also complaining about "punishing the rich". Boo hoo.
President Obama wasn't looking for a scapegoat, he never mentioned Mitt's dad, and Obama never expected an apology for Mitt Romney's success. President Obama just believes that successful people (like himself) should pay a proportionally fairer share of their incomes in taxes - and 72% of "fellow Americans" agree with the President, even "successful" ones like the Warren Buffett and the patriotic millionaires.
Too often the Republicans and wealthy people falsely use the disingenuous argument of "envy" and "class warfare" when counter-attacking the President and 72% of America when the discussion of raising taxes is mentioned. Envy and class warfare are attributes better associated with the wealthy, not average Americans, who aspire to one day be wealthy themselves.
Currently the top tax rates on ordinary income, dividends, estates, and gifts remain at or near
For the 400 U.S. taxpayers on the Forbes Fortune 400 list with the highest adjusted gross income, the effective federal income tax rate—what they actually pay—fell from almost 30 percent in 1995 to just over 18 percent in 2008, according to the Internal Revenue Service.
And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so.
The reason is, much of the income among the top 400 derives from dividends and capital gains, generated by everything from appreciated real estate, to stocks and the sale of family businesses. As Warren Buffett likes to point out, since most of his income is from dividends, his tax rate is less than that of the people who clean his office.
The Democrats put off a vote on letting the Bush tax cuts expire until after the Republicans won a sweeping victory in the 2010 congressional elections. Obama said he would negotiate with the Republican leaders and the "compromise" he made extended all of the Bush tax cuts for another two years. Unemployment benefits for the working poor had been held hostage by the Republicans. Extending the Bush tax cuts was supposed to create lots of jobs, remember?
Mitt Romney and his rich ilk called it fair, but to call this "fair" is laughable. It brings to mind Malcolm X's point that "you can't drive a knife into a man's back nine inches, pull it out six inches, and call it progress".
Over the past several decades, income and wealth inequality has increased dramatically. The top 1 percent now own over 40 percent of the nation's wealth, and their share of national income increased from 9 percent in 1976 to 26 percent today.
Meanwhile, the tax burden has shifted in exactly the opposite direction - - first, from corporations onto individuals, and second, from the wealthiest individuals onto everyone else.
In 1943, U.S. corporations paid nearly $1.50 in taxes for every $1 paid by individuals. By 1960, this amount had already fallen to just over 50 cents in corporate taxes for every $1 from individuals. But the trend continued over the following decades. By 2010, corporations were taxed about 22 cents for every dollar paid by individuals, about one-seventh the relative proportion they paid in 1943.
These figures contradict the deceptive claims of pro-business commentators who love to complain about how U.S. corporate tax rates--nominally 35 percent of income--are "the highest in the world."
In reality, the biggest corporations pay a fraction of that rate, if they pay any taxes at all. In a joint report, Citizens for Tax Justice and the Institute on Taxation and Economic Policy examined the tax records of 280 profitable Fortune 500 companies from 2008 to 2010. The average tax rate for all of these corporations was 18.5 percent, and 30 profitable corporations paid no taxes at all over the three-year period--they actually received a refund. A total of 78 companies paid no taxes during at least one of the three years.
There's an old saying that "nothing is certain except death and taxes" - - but that applies to everyone except major U.S. corporations, which are saved from death by insolvency with taxpayer-funded bailouts and freed from the burden of paying taxes despite massive profits.
Senator Kent Conrad (D-N.D.) chairman of the Senate Budget Committee, released the
Simpson-Bowles proposal into his committee this week. He didn’t expect to pursue a committee markup until after November’s presidential election. During
the unveiling, Conrad said he would hear opening statements on the proposal but that the process would end there.
According to Conrad, his Fiscal Commission Budget Plan will reform the current tax code by removing three of the six current tax brackets. The three tax brackets remaining include a 12%, 22% and 28% bracket. Additionally, Conrad said his proposal would reduce the deficit to 1.4 percent of GDP by 2022.
The House recently rejected another version of the Simpson-Bowles plan, 382-38.
Current Tax Brackets
Senator Kent Conrad's plan removes three brackets from progressive tax rates and changes the marginal rates, but he doesn't mention how (so I'll guess the incomes in the chart below). Those earning $0 - $8,700 will pay more, those earning $8,700 - $85,650 will pay less, those earning $85,650 - $178,650 will remain unchanged, and everyone else earning over $178,650 a year will pay less.
Senator Kent Conrad's Plan (New Simpson-Bowles)
You'll notice that tax rates for the very poor go up 2% (from 10% to 12%), and tax rates for the very top income bracket go down 7% (from 35% to 28%). The higher earners get the biggest tax break if they are paid ordinary wages, but capital gains and dividends for the wealthiest would be taxed as regular income (with exemptions, but Senator Kent Conrad's plan doesn't specify). His plan would also eliminate tax expenditures (with few details) and eliminates the alternative minimum tax entirely.
On January 1, 2013 the Bush-era tax cuts are set to expire, which would raise income tax rates on virtually every household; increase estate, dividend and capital gains tax rates; and shrink popular deductions like the child credit. But Obama just wants to let the cuts expire for the top marginal income bracket by using the Buffett Rule, and taxing incomes of over $1 million a year at 30%. For example, the wealthiest use capital gains to generate the bulk of their income, and is currently taxed historically low at only 15%.
Under Bill Clinton, before the Bush Tax Cuts
In February 2012, Mr. Obama repeated to a call to an end for the tax cuts for high-income households, and upped the ante by calling for capital gains to be taxed at the same rates as ordinary income, a measure that would raise about $206 billion over 10 years. Previously, he had proposed setting the capital gains rate at 20 percent for the wealthiest 2 percent of taxpayers.
Obama just wants the Bush tax cuts to expire for the upper income earners, and proposed the "Buffet Rule", taxing those earning $1 million a year a 30% tax rate - - which would raise capital gains from 15%, past the previous 20% rate, to 30%...which would still be less than the current top marginal rate of 35%, or 39.5% if the Bush tax cuts expired.
Long before the Bush tax cuts, tax rates for the wealthiest U.S. households had already declined dramatically. According to a report by Wealth for the Common Good, "Over the last half-century, America's wealthiest taxpayers have seen their tax outlays, as a share of income, drop by as much as two-thirds. During the same period, the tax outlay for middle-class Americans has not decreased."
As recently as the early 1960s, the tax rate on income at the highest levels--known in tax terminology as the top income bracket--exceeded 90 percent. By the end of Ronald Reagan's eight years in the White House in the 1980s, the rate had dropped below 30 percent. George H.W. Bush increased the top tax rate to 31 percent, and Clinton hiked it to 39.6 percent. The Bush tax cuts reduced the rate to 35 percent, where they remain today.
Meanwhile, the tax rate on capital gains, which was raised in the late 1960s and mid-1970s to a maximum of close to 40 percent, has been cut over the past few decades to the current rate of 15 percent. These reductions have almost exclusively benefited the top 1 percent. According to Citizens for Tax Justice, were the capital gains tax rate restored to its high point, 80 percent of the tax increase would be borne by the richest 1 percent of taxpayers, and 90 percent by the richest 5 percent.
Senator Kent Conrad's outline would not touch the president’s health care law, but it would phase out the employer tax deduction for health care and include additional health care cuts. It would lay down parameters to overhaul Social Security (and raising the age of retirement) to slow its growth. And it would set out prescriptions for a simpler tax code that eliminates or reduces scores of tax deductions, taxes dividends and capital gains as ordinary income, and lowers individual and corporate tax rates.
In that sense, the Bowles-Simpson plan may be no more viable now than it was in late 2010, when it got the votes of some conservatives and liberals on the presidential panel but failed to receive the support of the most conservative and liberal House members on the committee.
At the budget hearing Democrat Senator Mark Qarner piped up and sounded more like a Republican, saying low income people also need to "put more skin in the game."
Mitt Romney proposes a 20% tax cut in all tax brackets across the board (assuming the current income brackets).
Mitt Romney's Proposed Tax Plan
Romney would maintain the current tax rate of 15% on capital gains and dividends for households that earn $200,000 a year or more (the top 1%), keeping the wealthiest American's tax rates extremely low. High earning Americans who are paid through regular wages would pay a 25% rate, and the middle-class would pay 20% (Mitt Romney would still only being paying 15% on his carried interest...he's not raising or lowering his tax rates.)
Mitt Romney would lower the poorest American's tax rate only 2% (from 10 to 8 percent), but lower the top rate 7% (from 35 to 28 percent). In each way, the rich get richer as the poor get poorer because the poor will also have social programs cut in exchange for a little lower tax rate. Romney has said his goal is to reduce federal spending to no more than 20% of the economy by 2016, down from a current level of roughly 24%.
In round numbers (for the sake of argument), if someone earned $26,364 a year under Mitt Romney, they would see their taxes reduced by $791 - - from $3,954 to $3,163 (before exemptions and deductions).
On the other hand, someone earning $388,350 a year, would have their taxes reduced by $27,184 - - from $135,922 to $108,738 (before exemptions and deductions).
But the very rich, those who earn millions of dollars in capital gains, would only pay a 15% tax rate, and would not have their taxes reduced or increased...after all, they are already almost as low as they were in 1921 when the preferential treatment of capital gains was first introduced.
As you can see, the wealthiest get a huge tax break, while everybody else gets a meager one, but at the expense of huge budget cuts to government programs (e.g. Social Security, Medicare, TANF, food stamps, etc) that those in the top income bracket don't need.
Obama says he just wants the Bush tax cuts to expire for the top income bracket, and tax those earning over $1 million a year an effective tax of 30%. That would theoretically raise the top income bracket for regular wages from the current 35% to 39.9%.
It would also raise capital gains from 15% to 30% under the Buffett Rule, although the detail are a bit fuzzy.
In a recent TV interview, I heard Bill Clinton say that he "regretted" lowering the capital gains tax rate from 28% to 20%, before Bush lowered it further to 15%.
Near the end of the Gilded Age after World War I the Revenue Act of 1921 was passed after Republican Secretary of the Treasury Andrew Mellon (also the banker) argued that significant tax reduction was necessary in order to "spur economic expansion and restore prosperity".
Mellon obtained a repeal of the wartime excess profits tax and the top marginal rate on individuals fell from 73% to 58%. But the preferential treatment for capital gains was first introduced at a rate of only 12.5%, effectively lowering the wealthiest individual's tax rates from 73% to 12.5%
...a windfall for the super rich that's been in place for the past 90 years.
Under Obama's Tax Plan (estimated, using the current tax brackets)
Here's what I would propose: I would tax all income (inheritances, capital gains, SWAG investments, carried interest, dividends, wages, tips, gifts, bonuses, stock options, etc.) like ordinary earnings and tax them at the rate in the chart below. And then charge a 5% VAT Tax (value added tax) on all purchases over $500,000 - - and eliminate the CAP on Social Security taxes that people earning over $112,000 are presently not required to pay.
But either way, unless tax loop holes are eliminated for those who can afford a shrewd accountant or attorney (like Mitt Romney), who understands very complex tax shelters, there are many ways to dodge taxes. (Details here > How to Pay No Taxes: 10 Strategies Used by the Rich)
Here are some of them:
- The ‘No Sale’ Sale - Cashing in on stocks without triggering capital-gains taxes
- The Skyscraper Shuffle - Partnerships that let property owners liquidate without liability
- The Estate Tax Eliminator - How to leave future stock earnings to the kids and escape the estate tax
- The Trust Freeze - “Freezing” the value of an estate, so taxes don’t eat up its future appreciation
- The Option Option - Stock options allow executives to calibrate the taxes on their compensation in a big way
- The Bountiful Loss - Using, but not unloading, underwater stock shares to adjust your tax bill
- The Friendly Partner - With this deal, an investor can sell property without actually selling—or incurring taxes
- The Big Payback - So-called permanent life insurance policies are loaded with tax-avoiding benefits
- IRA Monte Carlo - Tax advisers recommend converting traditional IRAs to Roth IRAs—soon
- The Venti - Putting a chunk of pay in a deferred-compensation plan can mean decades of tax-free growth
With over 500 pages in his tax return, I wonder...how many of these shell games does Mitt Romney use? He clings to his money and is probably a cheap tipper when he goes to a restaurant.
More of my posts on taxes:
- The Republican's Small Business Tax Cut Act of 2012 is just another GOP Scam
- Mitt Romney's Offshore Bank Accounts
- BIG MONEY & tiny taxes
- Republicans Kill Buffett Rule, Refuse to Tax the Rich
- The Perfect Bipartisan Tax Plan
- Stocks up 64% since Tax Cuts for the Rich
- George W. Bush Still Lying About Tax Cuts
- Wealthy Heirs for Higher Taxes
- Why Congress Refuses to Tax the Rich
- Feed the Rich! Tax the Poor!
- Paul Ryan's 'New and Improved' Path to Austerity
- Wall Street Journal Debunked on Obama Tax Plan
- Obama Tax Plan vs. Mitt Romney's
- Mitt Romney: Lobbyists, Special Tax Rates & Tax Evasion
More of my posts on Mitt Romney:
- Mitt and Ann Romney are Full of Horse Manure!
- Ann Romney Needs to get a REAL Job!
- Mitt Romney Comes Clean
- Mitt Romney, the Forbes Fortune 400, and Taxes
- How Mitt Romney & the 1% Evades Taxes
- Mitt Romney - Mister 15% and Platinum Parachutes
- Efficiency expert Mitt Romney: "You're expendable."
- Mitt Romney Knows Envy Better than Anyone
- Mitt Romney Connected to $8.5 billion Ponzi Scheme
- For Mitt Romney, the Joke's on Us
- Mitt Romney was the real-life Gordon Gekko