The Romneys' tax returns confirm that America's tax and economic system is grossly inequitable. In 2010, the Romneys paid just over $3 million of taxes on about $21.6 million of reported income. That means their tax rate was less than 14% -- lower than the 15.3% rate every employee pays on his or her first dollar of wages. So the person who cleans Bain Capital's office building pays a higher tax rate than Romney does.
A seemingly harmless letter on page 131 of the Romneys' 2010 tax return reveals a source of our system's inequity. In that letter, the Romneys acknowledged receipt of an interest in a Bain Capital Partnership. The Romneys received that interest for Mr. Romney's services. A loophole in the U.S. tax code allowed them to value that interest at zero, enabling them to pay no tax on it. Instead, the Romneys will earn income when the Bain Capital Partnership earns income. Most of this income will be qualified dividend income or long-term capital gains taxed at no more than 15%.
The Romneys apparently built their wealth from Mr. Romney's work at Bain capital. The law allowed them to amass their wealth at lower tax rates, even though the income is from his labor.
The law treats Bain Capital's office cleaners much differently. The first dollar a cleaner receives is subject to 15.3% of employment tax. A cleaner who earns enough (perhaps with a second job) will owe income tax in addition to the 15.3% employment tax, making the cleaner's tax rate significantly more than the Romneys'.
After the Romneys paid their taxes, they had almost $19 million of disposable income. The cleaner, on the other hand, will struggle to make ends meet and will have little, if any, left after tax. Lower tax rates helped the Romneys amass a huge fortune; higher tax rates prevent the cleaning person from establishing modest retirement savings.
Mr. Romney's hard work cannot justify his favorable tax treatment. He didn't work harder than the cleaning person who took on multiple jobs to eke out a subsistence living.
Mr. Romney tops off his privileged existence by accusing us of being envious. Over the years, however, the Romneys have been doing all they can to lower their tax rates. They have used their significant wealth to hire tax professionals who structure the Romneys' affairs to lower their tax rates. As a politician, Mr. Romney can use his political power to further his benefits. He also uses contorted logic to gain support from people who suffer from the inequities of our system.
Mr. Romneys' actions represent the most basic form of class warfare. Some wealthy members of our society are fighting against the rest of the population. Nonetheless, if someone points out the inequity of the American tax system, Romney and his ilk accuse that person of waging class warfare.
I admire people who, without complaint or bitterness, work multiple jobs, provide the basic needs to their children, and pay a significant percent of their income to help fund critical public services that provide hope for a viable future. We should do all we can to eliminate the inequity that tilts our system in favor of the super-rich. Eliminating the tax breaks available to the rich is a good place to start.
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