Commentators are wondering if Romney will suffer from his admission that he pays taxes at a 15% effective rate while most other Americans pay a higher rate. The variance is due to the fact that investments are taxes at 15% while income is taxed according to a progressive marginal rate. There's debate about how this compares to everyone else's. Here a take that claims if you make $50,000 your effective rate is 16% and it goes up to almost 30% if you earn $1 million. Here's an alternative take here, with different numbers.
We should try to figure out which is correct, but regardless, it raises questions about how fairly the tax burden is spread (never mind that current tax rates do not - have generally not - paid for the costs of government. The rest is funded by selling bonds, which have to be repaid sometime down the road).
Ezra Klein has an interesting take on how Romney might be politically deal with this revelation:
Here's what we know, or think we know, about Mitt Romney's tax returns: He's paying an effective rate of 15 percent. He has millions of dollars stored in investment funds in the Cayman Islands. And though he says “I have nothing in them that suggests there’s any problem," he originally wasn't going to release them at all, and though he backed off of that position, now he won't release them until April. Why wait till April? Well, here's one theory: April is after Super Tuesday.
If the returns are released when Romney is already effectively the GOP nominee, the Republican Party will rally around him and treat the attacks on his returns as just one more partisan assault. They'll note, for instance, that if you combined John Kerry and Theresa Heinz Kerry's 2004 tax returns, the Kerrys were only paying an effective tax rate of 13 percent. They'll argue, as James Pethokoukis did yesterday, that the problem isn't that Romney managed to lower his tax bill, but that every other American hasn't been able to do the same.
But if they're released before that, and they contain other embarrassing revelations, they may lead the GOP, or at least a substantial portion of it, to conclude that Romney is not the strongest candidate to put up against President Obama in November. So the Romney campaign appears to have made a simple judgment: if the candidate's tax returns are going to pose a problem, better they pose a problem when Republicans have nowhere else to go.
That makes good strategic sense for the Romney campaign. It's not as obviously a winning strategy for the Republican Party. In an editorial published last night, the conservative National Review put it starkly. "It is critical that Romney release his tax records now, that voters might 'take a look and decide if we’ve got a flawed candidate,'" they wrote. "We know that should Romney become the nominee, he will be criticized over the sources of his wealth and will have to effectively respond. Republican primary voters deserve to see whether he can do so before they vote."
Its worth pointing out that the lower rate paid by investors almost certainly is a product of their greater influence in Congress than those who survive by earning incomes. We will note that Madison in Federalist #10 warned that powerful interests in Congress would ensure that the tax burden would fall more on those with less pull in the institution.
- Newt Gingrich says he paid 31% in 2010.
- George Romney paid a 37% tax rate.
