Romney: Actually, I Kind of Pay 50% Tax

January 27, 2012 2:20 p.m.

I’m pretty surprised that Mitt Romney’s team let their guy go down this path. Or maybe it’s just him. Stung by the 13.9% tax rate story and goaded on by some conservative columnists, Mitt Romney is now saying that his actual tax rate is “really closer to 45 or 50 percent.”Romney’s claims come pretty much right at the beginning of this interview below but he’s said it twice today. It’s gotten pretty little press even though these were public interviews; and kudos to Huffpo’s Jon Ward for putting together the story.

Romney’s argument is that even though he pays only 13.9%, he’s really paying something like 45% to 50% because the investment income he lives on comes from corporations. And those corporates also pay taxes. The nominal corporate tax rate is 35%, though of course many pay much lower. But if you add Romney’s rate together with this completely unrelated corporate tax he doesn’t pay, you get 50%, which Romney is now saying is real tax rate. In other words, he’s claiming he pays both taxes.

This is a preposterous explanation on so many levels. TPM’s employees pay tax. Are they also paying the tax TPM Media LLC pays? Or another example. Like everyone else I pay various taxes on my personal income. Then I go over to the store and buy my son a toy and I’m taxed on the same income AGAIN. This is silly. Investment income is taxed at 15%. End of story. This has long been a hobbyhorse for conservatives who do not believe there should be any tax on investment income at all. But it’s really just game playing.

You can see how stung he and his campaign must be by this story that they’re actually trying to make this cockamamie argument.

Late Update: A number of readers have written in to say, Yes, ‘Romney’s claim is bogus. But these analogies you’re giving aren’t very apt.’ And my answer is, sure, I know that. But the point I’m trying to make is that in a complex tax system there are numerous examples you can point to of what are arguably double taxation or theoretical rates different from the effective rates people pay. Let’s try an example: the entire political debate today is based on middle income people paying about 7.5% payroll tax on the first $100,000 of income (the cap is actually a touch higher than $100k now) in addition to their income taxes. But most economists would say that in fact the effective payroll tax on this income is double that because the employer has to match that contribution. So if you make $55,000 a year 15% in payroll tax is paid on your behalf. The tax paid by the employer on your behalf is effectively passed through to you. (This is why if you’re self-employed — a freelance writer like I was for a while — you actually get hit with a pretty onerous 15% tax on every dollar because you pay both as employed and employer.) Then there’s another side of this. Romney says when you add the corporate tax it’s additional 35%. Well, that’s not remotely true. The CBO has run these numbers and found that if you include the indirect payment of corporate taxes by stockholders — precisely what Romney is referring to — the effective rate for people in Romney’s income class is about 10%. In other words, even taking Romney’s argument on its own terms, he’s off by more than threefold. 35% claim versus 10% reality. The larger point — and the one I was making above — is that there are all sorts of ways you can complicate the picture if you get out the green eyeshades and start digging into all the complexities of and colorable arguments about the tax code. When you pick out just one place to dig in and not all the others, it’s almost always to try to hoodwink people, like Romney is here. So to keep everyone honest, it’s best to go by the actual taxes actual people are paying — the way that Romney’s rate is 13.9% — rather than trying to fool people like Romney is with his preposterous claim.

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