Mitt Romney has now disclosed that he paid only 14.5 percent of his reported income in federal income taxes in 2010. That’s no surprise. My group, Citizens for Tax Justice, predicted as much last fall, based on Romney’s previous disclosure that almost all of his 2010 income came from capital gains and dividends taxed at the low 15 percent top rate.
Newt Gingrich insists that this is not fair. Touting his own “flat tax” proposal on January 17, Newt said, “I think we ought to rename our flat tax, we have a 15 percent flat tax, so this would be the ‘Mitt Romney flat tax.’ All Americans would pay the rate Mitt Romney paid. I think it’s terrific.”
Putting aside the fact that Newt’s preposterous flat tax would slash federal revenues by $18 trillion over the next decade, there’s another noteworthy flaw in his argument. Gingrich’s actual “flat tax” proposal would cut Romney’s tax rate to zero (because it exempts all investment income from tax).
With the two leading Republican presidential contenders arguing over whether super-wealthy investors should pay 15 percent or zero percent in federal taxes, it would seem that President Barack Obama has a potent campaign issue against either of them.
If we stick with current law, then starting in 2013, Romney will have to pay a federal tax rate of about 26 percent. That’s due in part to the scheduled expiration of the Bush tax cuts, which have temporarily reduced the top capital gains tax rate from 20 percent to 15 percent and cut the top dividend tax rate to 15 percent as well (down from 39.6 percent). In addition, the Affordable Health Care Act will make Romney pay a 3.8 percent Medicare tax on his investment income (previously, investment income had been exempt from the Medicare tax).
Sadly, Obama hasn’t yet proposed to let all of the Bush tax cuts for the rich expire. In particular, his proposals so far would let the wealthy keep almost all of their dividend tax cut. But even if Obama doesn’t go beyond what he’s proposed in the past (and gets his way), then Romney would pay about a 23 percent federal tax rate starting in 2013.
On the other hand, if Obama means what he implies about the so-called Buffett Rule, then to keep up with the tax rate paid by Warren Buffett’s now-famous secretary, Romney would have to pay about a 30 percent rate.
On a related, happy note, Obama let slip the other day that he now wants corporate tax reform to raise significant revenue. Since he had earlier indicated that he thought corporations are paying just about the perfect amount in total taxes right now, this sounds like a major and favorable evolution in Obama’s thinking.
Of course, regarding all these important tax issues, we’ll have to see what Obama says in his State of the Union address tonight, in his upcoming budget proposals, and during the campaign.
But, possibly, Hooray!