By Tom Quiner
He’s taking heat for dragging his feet on releasing his income tax records. Why? Because it will reveal that most of his income is derived from investments, which is taxed at the lower capital gains tax rate than income.
Mr. Romney will take heat because his tax rate is “lower than his secretary’s,” to quote Warren Buffet. The impression is that a millionaire like Romney, one of the reviled “1%,” is proof at how the system is cooked in favor of the “rich.”
Let’s look at this issue as objectively as possible. For starters, Mr. Romney has already paid income tax on this money once. Most investments are made with after-tax dollars. Money earned off of investments SHOULD be less, because it has already been taxed once.
The capital gains tax rate is 15%. President Obama wants to increase it to 25%. Newt Gingrich wants to decrease it to zero. Who will spend that 15% (or 25% if Obama gets his way) better? Romney or the government? Romney will.
We see how the government mismanages money. Just check out the deficit. Just check out the national debt. Just check out Medicare, Social Security, Medicaid. Just check out the debt ceiling debacle(s). Just check out the gridlocked Congress.
The government spends much of our money inefficiently. (For the record, conservatives embrace the idea of a government safety net. The debate centers on degree. There ARE some good government programs.)
What will Mr. Romney do with this 15% tax if his political adversary, Newt Gingrich, prevails and gives it back to him? He will re-invest it. Where? One place would certainly be start-up businesses. That’s where a lot of investment dollars go with wealthy Americans. They invest in the young, emerging businesses where ALL the job creation takes place. And the upside potential of a good investment is very high with a good start-up. By the same token the risk is higher. That’s why we need investment capital: to finance the risk associated with entrepreneurship.
I’ll pick my spots on where I beat up on Mitt Romney. Assuming that everything else is above board on this tax returns, I give Mitt Romney a pass even if he has paid a lower rate.