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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.
Republican presidential frontrunner and multimillionaire Mitt Romney sparked political backlash this week when he revealed that he pays federal taxes at a rate of about 15 percent. But the hoopla over Romney’s lower tax rate points to a more complicated issue, that the 15 percent figure is based not on earned income, but rather income that “comes overwhelmingly from investments made in the past,” Romney said Tuesday.
Under Bush-era tax cuts supported by many Republicans, investment income is subject to significantly lower tax rates. Still, 15 percent is the tax bracket for those earning about $34,000 a year, while the maximum marginal U.S. income tax rate of 35 percent applies to those with taxable income of more than $388,500 in earnings. According to The Associated Press, President Obama and his wife paid federal taxes of just over 25 percent of their 2010 income of $1.7 million, mostly from book royalties and a $400,000 presidential salary. Romney’s Republication rival Newt Gingrich said Wednesday he himself paid 31 percent of his income in taxes for 2010. “My goal is not to raise Mitt Romney's taxes but to let everyone pay Romney's rate,'' said Gingrich, pointedly mentioning his proposed plan giving Americans the option of paying a 15 percent flat tax. With pressure building, Romney now says he will release tax filing information for 2011 in April, as the Republican nominee race comes to a head.
How do you feel about Romney’s tax rate? Should he pay more, or should everyone pay 15 percent, regardless of whether your income comes from earnings or investments?
Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian think tank
Selwyn Gerber CPA, managing partner and founder of Gerber & Co., Inc.