Plutocracy down through the years: Mitt Romney says his effective federal tax rate is close to 15 percent.
That means he pays roughly 15 percent of his income in combined federal income and payroll taxes. Our side is going to wail about that. But upon reflection, this is a fact about the federal tax system more than it is about Romney.
How can people of such wealth pay so little in federal taxes? In this morning’s New York Times, David Kocieniewski tells the familiar story:
KOCIENIEWSKI (1/18/12): The effective federal income tax rate paid by the wealthiest Americans has dropped significantly during the last several decades, largely because of tax cuts on investment income.Under the GOP’s sainted Reagan, wealthy people paid 28 percent on capital gains; that matched the top rate on salaries and wages. But a quarter century later, the rate on capital gains stands at 15 percent—and the top rate on salaries and wages has risen to 35! Since Romney gains his income the old-fashioned way, he pays around 15 percent.
The last major overhaul of the tax code, signed by President Ronald Reagan in 1986, set tax rates on capital gains at the same level as the rates on ordinary income like salaries and wages, with both topping out at 28 percent. But that link was uncoupled by his successor, President George Bush, and the rates on capital gains were reduced by President Bill Clinton. President George W. Bush then lowered the rates on capital gains and dividends to a high of 15 percent—less than half the 35 percent top rate on ordinary income.
Our side is going to wail about this, but it isn’t mainly a fact about Romney. Kocieniewski recalls the complaint of one of our own side’s new saints:
KOCIENIEWSKI: One outspoken critic has been Warren E. Buffett, a billionaire himself. Mr. Buffett stirred debate about the issue last year when he wrote an opinion article for The New York Times stating that the low rates for investment income had allowed him to pay only about 17 percent of his income in federal taxes, less than the effective rate paid by his secretary or any of the other 19 workers in his office.Liberals salute Buffett for speaking out—but in practice, he is paying the same low rates paid by Candidate Romney. That’s the rate these men are required to pay under our plutocrat-friendly tax laws. And yes, the changes in those laws have helped those who need help the least:
“Between 1985 and 2008, the wealthiest 400 Americans saw the percentage of their income paid in federal income taxes drop from 29 percent to 18 percent,” Kocieniewski writes. He notes that this drop in effective tax rate has been caused, in large part, by the change in these laws.
It has been a good era for plutocrats! Romney’s tax rate provides a new way to explain this situation to voters. Most likely, our side will screech and wail about his vile ways—and do little more. The chance to create a larger understanding may get lost in the partisan clatter.
Almost everything does.
One final question: Why do Warren Buffett’s employees pay a higher tax rate than he does? In an accompanying report by Nicholas Confessore, a graphic shows that people in the middle income quintile pay an effective federal tax rate of 12.7 percent on average. People in the fourth quintile—average income, $94,100—pay an effective federal tax rate of 15.7 percent.
Why do Buffett’s employees pay more than he does? If Buffett pays around 17 percent, why the heck is his secretary paying more?
In a political culture defined by partisan yelling, have you ever seen anyone help you understand that?
In our view: In our view, Confessore’s front-page report includes several bits of anti-Romney snark, including one bit of snark which appears quite early on. Can you spot these pieces of snark? Do you think they qualify as news? Do you think they should be in a news report?
We don’t. But this is easier, and more fun, than it would be to report Romney’s conduct at Bain, which the Times still hasn’t much done.
Have you seen Rachel complain about that? No—and you never will. You are hustled right to the ends of the earth. For one result, just check the scoreboard:
Ronald Reagan 28, George W. Bush 15