Quote:
Originally Posted by Fast Gunn
Blaming the law, but not the man is simply reaching to excuse the man.
It is self evident that the problem is not so much the law as the dishonest man.
A dishonest man will find ways to circumvent the laws that do not profit him even if it means cheating the country where he made his fortune.
. . . Honest men who made as much money as Romney paid a hell of a lot more income taxes!
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Quote:
Originally Posted by Fast Gunn
To anyone with an open mind, the facts alone of a multimillionaire paying only a paltry 13% income taxes tells the entire story.
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Well, not quite.
First of all, let me say that in no way should this be interpreted as a claim on my part that there's nothing fishy about Romney's tax returns. There very well may be; otherwise, it seems unlikely to me that he would be willing to incur this much political damage. A lot of people think it's more likely than not that the potential embarrassment could involve the Treasury's offshore accounts amnesty program of 2009.
But because of the way in which most investors' holdings are structured, it's actually pretty hard to pay a tax rate higher than what Romney reportedly pays, even if you try to do so. It's important to consider the way the tax code treats different types of "income." Please note that it's extremely unlikely that more than a
very tiny percentage of Romney's resources come from what we generally refer to as "ordinary income" -- salary, fees, commissions, interest, and the like. I don't know the deal structure of Romney's and Bain's activities, but I think it's fairly safe to assume that carried interest, capital gains, and qualified dividends, which are all taxed at a rate of 15%, account for something reasonably close to 100% of the total.
Many people are not familiar with the term "carried interest." This is not some new twist; it's been around for many years. Here's the wikipedia definition:
http://en.wikipedia.org/wiki/Carried_interest
If you google "carried interest", you'll find a number of more detailed explanations.
No one ever thought much about this issue until back around 2006-2007. A few reporters noticed that some very wealthy hedge fund managers were making huge sums of money while paying tax at only a 15% rate, even on gains accruing from investments in which they had no capital at risk. As I recall, it was estimated that this break cost the Treasury about $4 billion annually. There folllowed an effort in congress to end the break.
Of course, it was blocked in the Senate. Can you guess what two well-known Senators played key roles in running interference for those who wanted to keep the tax break? (Hint: Their first names are Charles (Chuck) and Hillary.) A number of very wealthy New York hedge fund managers "politely asked" for their assistance, and the level of "politeness" on the part of those folks can be very sunstantial indeed! And some of those guys almost make Romney look poor by comparison.
Speaking of people who make Romney look poor by comparison, just think for a moment about Warren Buffett's tax situation. Although he famously called for increased taxes on the wealthy, you might note that he would be almost completely sheltered from their possible implementation. In fact, if you look at the
total tax he pays on his wealth accumulation, you'll find that it's a tiny percentage of what Romney pays. He enjoys a type of shelter that makes Romney seem like a piker by comparison. If you don't count things like tax incidence on corporate income, and go solely by what he actually sends to the Treasury, you'll see that he does even better than getting his tax rate down to below 1%, which a recent anaysis (referenced in an earlier post mentioning a 0.82% rate) says that Romney would pay if the Ryan tax plan were fully implemented.
The shelter Buffett uses could be referred to as the "corporate holding company dividend tax exclusion." Suffice it to say that if Buffett wanted to pay more tax, he could simply hold tens of billions of the stock positions he beneficially holds in Berkshire Hathaway in his own name. That way, instead of limiting his personal tax liability to about $7 million annually, he could experience the joy of sending the Treasury checks for several hundred million dollars every year!
If anyone knows of a case involving a successful entrepreneur or investor,
of any political persuasion, refusing to take advantage of well-known "loopholes" -- and instead advising his CPAs and tax counsel that he wants to do his "patriotic duty" and send a lot more money to the Treasury, please let us know!
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