I did my weekly Economy Report on "American Now with Andy Dean" a day early this week — Thursday rather than Friday. Andy very kindly informed me that the first step to leaving the liberal matrix is admitting that you have a problem, but I think I need to know what the other eleven steps are before I'm fully prepared to go down that road. In any case, we ran through the business news of the week, which included President Obama's budget; General Motors' record 2012 profit and Mitt Romney's view of the bailouts; the thorny question of whether "carried interest" income earned by folks in the financial sector should be taxed as regular income; and the whole dustup over Starbucks policy toward gun owners.
Listen in! It was a snappy discussion, as usual. I come in about halfway though.
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MYRTLE BEACH, SC - JANUARY 16: Republican Presidential candidates, former Massachusetts Gov. Mitt Romney (L) and former U.S. House Speaker Newt Gingrich (R-GA) share a laugh during a Fox News, Wall Street Journal-sponsored debate at the Myrtle Beach Convention Center, on January 16, 2012 in Myrtle Beach, South Carolina. Voters in South Carolina will head to the polls on January 21st. to vote in the Republican primary election to pick their choice for U.S. presidential candidate. (Photo by Joe Raedle/Getty Images)
Mitt Romney released his 2010 and 2011 tax returns today, revealing that he is, as we already knew, R-I-C-H. What's eye-popping — and what explains why Romney has been reluctant throughout his political career to provide a window into his finances — is how low his federal taxes are, relatively to people who make their money on "earned income," such as wages and salaries.
The numbers are large. In 2010, Romney made $21.6 million on 2010 and paid $3 million in federal taxes, and effective rate of just 13.9 percent. In 2011, he reported making $20.9 million in 2011 and expects to pay an effective rate of 15.4 percent.
If it's any consolation to people who routinely pay taxes the mid-20-percent bracket, the Romneys overpaid in 2010, to the tune of $1.6 million. Time for a new accountant, Mitt!
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The top of a form 1040 individual income tax return.
Fred Wilson, a venture capitalist at Union Square Ventures in New York, blogs daily at AVC and blogs well. His is the first post I read almost everyday, from a Google Reader that pipes in hundreds. I've written about his thinking before. There are times when he's great. And there are times when he drives me crazy.
On Sunday (he doesn't take the weekend off) the crazy was in evidence (in me, not Fred). After some speculation on where Mitt Romney's income comes from and why it's taxed at 15 percent, he goes on to discuss his own misgivings about getting a similar deal in his own business, due to the "carried interest" exception that allows him to treat income as capital gains. Then this:
...I am bothered by the unfairness of the situation. When I get a big distribution from our funds, I always ask my accountants how much of the distribution I should set aside for federal, state, and local taxes. The answer is usually something like 28% (the difference between 28% and 15% is the state and local taxes). And then I often think of my two brothers who probably pay 40-50% of their income each year in federal, state, and local taxes. It just seems so unfair.
And so lately I've been more and more attracted to the idea of a flat tax where everyone pays the same tax rate on income above a minimum amount. In this model, we would eliminate all tax deductions; for mortgages, charitable giving, for medical expenses, etc. There would be no difference in tax rates for ordinary income vs other forms of income (ie capital gains).
If we did that maybe everyone could pay a 15% tax rate like Mitt Romney and our family does. We would have a fair tax system.
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Republican presidential hopeful Mitt Romney addresses a primary night victory rally in Manchester, New Hampshire, January 10, 2012. AFP PHOTO/Emmanuel Dunand (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)
At last night's Republican debate, Mitt Romney said that if he sews up the nomination, he would likely release his tax returns, as opponents and the Obama Administration have demanded. This is from USA Today:
I think I've heard enough from folks saying, look, let's see your tax records. I have nothing in them that suggests there's any problem and I'm happy to do so. I sort of feel like we are showing a lot of exposure at this point. And if I become our nominee, and what's happened in history is people have released them in about April of the coming year and that's probably what I would do.
OK, so Romney isn't necessarily the most blissfully fluid speaker in the land. It's hard to blame him for nonlinear sentence structure after the 734 debates he's endured in his quest to take on the president in November. But a more important question looms: What would we learn from Romney taxes?