I've always been fascinated by politics and the people who choose to run for office. So, if you aren't much into politics, I still hope you stay tuned as I try and explain a topic that I've just recently learned more about. (They tell you in blogging school not to delve into politics and religion – but I'm ignoring conventional wisdom here and diving right in.)
Every presidential season, as time gets nearer to pick a party candidate, the scrutiny gets more and more severe for all front-runners. The media, opposing parties, start digging into a candidates personal life in hopes of finding a “scoop” or something that might (in the case of the opposition) make their hopeful look more – well – hopeful.
And so, we find ourselves right smack in the middle of it. With GOP candidate Mitt Romney running neck in neck with Newt Gingrich – the hunting into personal matters has grown intense.
Today (Tuesday), Romney released his tax records for the past couple years, showing that he made about $42 million in 2010 and 2011 (est.) And, the “effective” tax rate for those years was about 14%.
Now according to Reuters, the average high-buck maker like Romney pays about 35% in personal taxes yearly.
So, is there a problem here?
Well, not really. According to my high school level research, Romney uses a legal “loophole” in the tax system which is related to something called carried interest. In essence, it allows people to receive lots of moola working at a private equity firm and then only pay the taxes based on a captial gains tax rate – which is a lot lower than the personal income tax rate.
So, it seems to me that Romney really hasn't been working (in the sense of a 9-5 job like most of us) these past few years – but has been living on monies received through these investments of his. This is why he's paying a capital gains rate (of or around 15%).
I hope you learned something and are more educated about this now (as I am). I'm not advocating any one candidate over another right now – just trying to sort this out as we go along and not try and get swayed so much about what I hear in the media.
Do you think it's right that a wealthy American like Romney pay so little in taxes – as a percentage?