FacebookTwitterGoogle+RedditEmail

Romney’s Tax Fairness Garbage

by GERALD E. SCORSE

Answering a direct question on “60 Minutes” last Sunday, Mitt Romney said it was fair for him to pay a lower tax on $20 million in capital gains than a worker pays on $50,000 in wages “because capital has already been taxed once at the corporate level, as high as 35 percent.”

Romney was echoing a claim contained in an Ernst & Young study purporting to calculate “integrated” tax rates on capital gains and dividends by (listen up, now) combining taxes paid at the corporate and individual levels. The study mixes apples, oranges and tomatoes too, in a crazy right-wing stew.

He delivered his answer with a straight face, to a national television audience, as if it were the gosh-honest truth. In the real world it’s gosh-awful garbage.

The same study was used by the chairman of the House Ways and Means Committee, Rep. Dave Camp (R-MI), in his opening statement to a hearing last week on tax reform and the tax treatment of capital gains. Here’s an eye-opening sample:

“As we consider the economic impact of the tax burden associated with capital gains, it is critical that we focus on the total integrated rate, which is nearly 45 percent, not just the statutory rate of 15 percent. The capital gains tax is often, though not always, a double layer of taxation. For example, in the case of shares of stock, a company’s income is first taxed at the corporate rate. Then, when shareholders of the company later decide to sell their stock, they are subject to capital gains tax on the sale. But the value of the stock they sell has already been reduced by the fact that the corporation previously paid out a portions of its earnings as taxes. So, even if we make current low-tax policies permanent, the top integrated rate on capital gains is actually 44.75 percent – a 35 percent first layer of tax and a 15 percent capital gains tax. If we allow current low-tax policies to expire, the top integrated rate on capital gains will exceed 50 percent.”

Ernst & Young is saying, and expects you to agree, that a tax on a corporation’s income is really a “35 percent first layer of tax” on an individual’s stock market gain. Is it? Let’s see.

Let’s start by noting that a capital gain, by definition, is the difference between the basis price (the price paid for the stock in the first place) and the proceeds, the amount realized when the stock is sold. By definition, the capital gains never existed before; by definition, the capital gains were never taxed before; lastly and also by definition, “double taxation” of capital gains is a complete and total fiction.

Let’s also note that any claimed relationship between a corporation’s money and an individual’s stock market capital gain is essentially non-existent; to “integrate” these monies, and to pronounce a tax on one the same as a tax on the other, is rubbish.

Finally, let’s note that the 35 percent tax rate cited by Ernst & Young (and echoed by Romney) is mighty misleading. It’s the top corporate rate all right, but it’s paid by few U.S. companies. Many major U.S. corporations are members, in fact, of Romney’s moocher class: via various loopholes and tax dodges (which Romney knows a thing or two about), they pay no federal income tax at all.

The last paragraph of Camp’s opening statement refers to “compelling arguments for providing a preferential tax treatment for capital gains.” Those “compelling arguments” were rejected in late 2011 by President Obama’s Simpson-Bowles fiscal commission, which called for equal taxes on all income: the same tax rates on capital gains and dividends as the tax rates on wages.

Mitt Romney may think it’s fair that capital gains and dividends get taxed at a lower rate than wages. Simpson-Bowles didn’t think so, nor did the Bipartisan Policy Center in Washington in a second blue-ribbon deficit reduction report issued shortly afterward. That report, the so-called Rivlin-Domenici report, also called for equal taxes on all income.

So too, long ago, did GOP icon Ronald Reagan. One of the centerpieces of Reagan’s signature Tax Reform Act of 1986 was equal taxes on income from wealth and income from work.

Gerald E. Scorse helped pass the bill requiring basis reporting of capital gains. He writes articles on taxes.

More articles by:

CounterPunch Magazine

minimag-edit

Weekend Edition
September 23, 2016
Friday - Sunday
Andrew Levine
The Meaning of the Trump Surge
Jeffrey St. Clair
Roaming Charges: More Pricks Than Kicks
Mike Whitney
Oh, Say Can You See the Carnage? Why Stand for a Country That Can Gun You Down in Cold Blood?
Chris Welzenbach
The Diminution of Chris Hayes
Vincent Emanuele
The Riots Will Continue
Rob Urie
A Scam Too Far
Pepe Escobar
Les Deplorables
Patrick Cockburn
Airstrikes, Obfuscation and Propaganda in Syria
Timothy Braatz
The Quarterback and the Propaganda
Sheldon Richman
Obama Rewards Israel’s Bad Behavior
Libby Lunstrum - Patrick Bond
Militarizing Game Parks and Marketing Wildlife are Unsustainable Strategies
Andy Thayer
More Cops Will Worsen, Not Help, Chicago’s Violence Problem
Louis Yako
Can Westerners Help Refugees from War-torn Countries?
David Rosen
Rudy Giuliani & Trump’s Possible Cabinet
Joyce Nelson
TISA and the Privatization of Public Services
Pete Dolack
Global Warming Will Accelerate as Oceans Reach Limits of Remediation
Franklin Lamb
34 Years After the Sabra-Shatila Massacre
Cesar Chelala
How One Man Held off Nuclear War
Norman Pollack
Sovereign Immunity, War Crimes, and Compensation to 9/11 Families
Lamont Lilly
Standing Rock Stakes Claim for Sovereignty: Eyewitness Report From North Dakota
Barbara G. Ellis
A Sandernista Priority: Push Bernie’s Planks!
Hiroyuki Hamada
How Do We Dream the Dream of Peace Together?
Russell Mokhiber
From Rags and Robes to Speedos and Thongs: Why Trump is Crushing Clinton in WV
Julian Vigo
Living La Vida Loca
Aidan O'Brien
Where is Europe’s Duterte? 
Abel Cohen
Russia’s Improbable Role in Everything
Ron Jacobs
A Change Has Gotta’ Come
Uri Avnery
Shimon Peres and the Saga of Sisyphus
Graham Peebles
Ethiopian’s Crying out for Freedom and Justice
Robert Koehler
Stop the Killing
Thomas Knapp
Election 2016: Of Dog Legs and “Debates”
Yves Engler
The Media’s Biased Perspective
Victor Grossman
Omens From Berlin
Christopher Brauchli
Wells Fargo as Metaphor for the Trump Campaign
Nyla Ali Khan
War of Words Between India and Pakistan at the United Nations
Tom Barnard
Block the Bunker! Historic Victory Against Police Boondoggle in Seattle
James Rothenberg
Bullshit Recognition as Survival Tactic
Ed Rampell
A Tale of Billionaires & Ballot Bandits
Kristine Mattis
Persnickety Publishing Pet-Peeves
Charles R. Larson
Review: Helen Dewitt’s “The Last Samurai”
David Yearsley
Torture Chamber Music
September 22, 2016
Dave Lindorff
Wells Fargo’s Stumpf Leads the Way
Stan Cox
If There’s a World War II-Style Climate Mobilization, It has to Go All the Way—and Then Some
Binoy Kampmark
Source Betrayed: the Washington Post and Edward Snowden
John W. Whitehead
Wards of the Nanny State
FacebookTwitterGoogle+RedditEmail