Romney’s Tax Fairness Garbage


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.

October 08, 2015
Michael Horton
Why is the US Aiding and Enabling Saudi Arabia’s Genocidal War in Yemen?
Ben Debney
Guns, Trump and Mental Illness
Pepe Escobar
The NATO-Russia Face Off in Syria
Yoav Litvin
Israeli Occupation for Dummies
Lawrence Davidson
Deep Poverty in America: the On-Going Tradition of Not Caring
Thomas Knapp
War Party’s New Line: Vladimir Putin is Why We Can’t Have Nice Things
Brandon Jordan
Sowing the Seeds of War in Uruguay
Binoy Kampmark
Imperilled by Unfree Trade: the TPP on Environment and Labor
John McMurtry
The Canadian Elections: Cover-Up and Steal (Again)
Anthony Papa
Coming Home: an Open Letter to 6,000 Soon-to-be-Released Drug War Prisoners From an Ex-Con
Ramzy Baroud
Listen to Syrians: The Media Jackals and the People’s Narrative
Norman Pollack
Heart of Darkness: A Two-Way Street
Gilbert Mercier
Will Russia, Iran, Hezbollah and Iraqi Shiite Militias Defeat ISIS in Syria and Iraq?
John Stanton
Vietnam 2.0 and California Dreamin’ in Ukraine
William John Cox
The Pornography of Hatred
October 07, 2015
Nancy Scheper-Hughes
Witness to a Troubled Saint-Making: Junipero Serra and the Theology of Failure
Luciana Bohne
The Double-Speak of American Civilian Humanitarianism
Joyce Nelson
TPP: Big Pharma’s Big Deal
Jonathan Cook
Israel Lights the Touchpaper at Al-Aqsa Again
Joseph Natoli
The Wreckage in Sight We Fail To See
Piero Gleijeses
Cuba’s Jorge Risquet: the Brother I Never Had
Andrew Stewart
Do #BlackLivesMatter to Dunkin’ Donuts?
Rajesh Makwana
#GlobalGoals? The Truth About Poverty and How to Address It
Joan Berezin
Elections 2016: A New Opening or Business as Usual?
Dave Randle
The Man Who Sold Motown to the World
Adam Bartley
“Shameless”: Hillary Clinton, Human Rights and China
Binoy Kampmark
The Killings in Oregon: Business as Usual
Harvey Wasserman
Why Bernie and Hillary Must Address America’s Dying Nuke Reactors
Tom H. Hastings
Unarmed Cops and a Can-do Culture of Nonviolence
October 06, 2015
Vijay Prashad
Afghanistan, the Terrible War: Money for Nothing
Mike Whitney
How Putin will Win in Syria
Paul Street
Yes, There is an Imperialist Ruling Class
Paul Craig Roberts
American Vice
Kathy Kelly
Bombing Hospitals: 22 People Killed by US Airstrike on Doctors Without Borders Hospital in Kunduz, Afghanistan
Ron Jacobs
Patti Smith and the Beauty of Memory
David Macaray
Coal Executive Finally Brought Up on Criminal Charges
Norman Pollack
Cold War Rhetoric: The Kept Intelligentsia
Cecil Brown
The Firing This Time: School Shootings and James Baldwin’s Final Message
Roger Annis
The Canadian Election and the Global Climate Crisis
W. T. Whitney
Why is the US Government Persecuting IFCO/Pastors for Peace Humanitarian Organization?
Jesse Jackson
Alabama’s New Jim Crow Far From Subtle
Joe Ramsey
After Umpqua: Does America Have a Gun Problem….or a Dying Capitalist Empire Problem?
Murray Dobbin
Rise Up, Precariat! Cheap Labour is Over
October 05, 2015
Michael Hudson
Parasites in the Body Economic: the Disasters of Neoliberalism
Patrick Cockburn
Why We Should Welcome Russia’s Entry Into Syrian War