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Intro: "Call me peculiar, but I'm actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils - partly out of voyeurism, of course, but also because it's about time that we had this discussion."

Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)

Taxes at the Top

By Paul Krugman, The New York Times

20 January 12

Call me peculiar, but I’m actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils - partly out of voyeurism, of course, but also because it’s about time that we had this discussion.

The theme of his dance, for those who haven’t been paying attention, is taxes - his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return.

Even then, however, he will face pressure to release previous returns, too - like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).

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+73 # jlohman 2012-01-20 08:14

But more so, do we want someone in the top 1% making rules on how to tax people (including themselves)?

+21 # Regina 2012-01-20 08:50

They already have -- that's why "investments" are taxed at 15% and real-labor income at 15%++++++++++.. ..

+49 # LarrySantoro 2012-01-20 08:56

How shameful we are, expecting a man with a personal fortune of a quarter-billion dollars--tens of millions of them on vacaation in the Cayman Islands--and whose small, almost not-worth-speak ing-about speakiing-fees for the year at more than three times my own workaday salary, to pay more than my own 15 percent. Class Warfare I say! That's not the American Way. Come on Mitt, let's step into a quiet little room together and discuss it rationally without all those noisy "people" asking rude questions.

+21 # AndreM5 2012-01-20 09:19

All thinkgs considered, dancing hypocrites are not that amusing anyway. Witness the RNC fake "debates." Put a sock in it already!

+37 # bugbuster 2012-01-20 09:24

Judging from the rise of "financialism" over recent years, the reinvestment that does go on is not in real productivity, it's in the kinds of financial gimmicks--casin o faux-capitalism that trashed the economy in 2008 and continues today. *That* kind of "investment" should be subject to punitive surtaxes as an obscene waste of *our hard earned money.*

-65 # Robt Eagle 2012-01-20 09:35

So it was ok when Bill CLinton was part of the 1% in the White House, but no good if they are Republican Conservative successful Americans???

+30 # reiverpacific 2012-01-20 10:49

Quoting Robt Eagle:

So it was ok when Bill CLinton was part of the 1% in the White House, but no good if they are Republican Conservative successful Americans???

Clinton didn't join the upper echelon until he left office -and I doubt even now that he's in that rarified 1% stratum, as he stated personally in his campaign support speeches on behalf of his wife and Obama. I remember it well as a personal acknowledgment and almost a confession after major "Successful" sales of his book, that he'd become "one of them", whilst comparing "Their" methods of unbalanced exploitation unfavorably.
"Successful" is very relative term and stretches over a wide spectrum of attainment from spiritual, creative and lives lived for benefit others, not accumulated, acquisitive and greed-driven, power-seeking financial skullduggery and self-aggrandizement.
That your proud definition, o' reactionary one? Just have to point a spiteful and vaguely nasty finger don't you? It's probably pointin' right back at ya!

+14 # noitall 2012-01-20 12:16

Is this a GOP/Dem comparison? I don't think so. One would be hard pressed to defend the Clintons although reiverpacific took to the challenge. This is the issue; neither party turns a blind eye to the money shoved their way; they are all swayed by the moneyed folks. Our issue is, we shouldn't have to wave $$$$$ in order for our so-called leaders to make the right decisions for our Nation, Republic, Democracy! The fingers aren't pointed at JUST your GOP party Robt Eagle, but Dem heros as well.

+32 # reiverpacific 2012-01-20 09:44

What troubles me more than all this stuttering about his off-shore banking and finances in general (and the other appallingly corrupt in one way or another hypocritical wanna-be-presid ential hopelesses, especially Noot) is his atrophied attitude to what is going on around him, pledging at one point to " build up the military to the point where no one will dare challenge or threaten us" or words to that general effect, and that he thought that the "Foreclosures should be allowed to continue so that they would eventually balance market prices out"!
The scary part is that ANYBODY is supporting this well-heeled and blinkered follower of Joseph Smith's wild-fantasy religion (including my wife's cousin in S. Carolina, who is not stupid by any means -just narrow-minded and incapable of debate) for such a position of power -or any position at all.

-52 # lnason@umassd.edu 2012-01-20 10:00

Krugman conveniently ignores the fact that the profits from corporations are taxed at 35% (although sometimes less due to congressionally approved loopholes) before being distributed to investors. After the 35% is taken from the top, then the investor pays an additional 15% in capital gains taxes.

This makes the effective tax rate over 40% -- significantly more than the highest tax rate for wage earners who earn all of their income in regular jobs.
BTW, this analysis makes clear why Warren Buffett does not pay lower taxes than his secretary although many of Buffett's businesses are favored by congressionally -approved loopholes and his rate is not the whopping 40% that Mitt Romney presumably pays.

More importantly however is that fact that this low rate for capital gains taxes incentivizes investors to take risks and create new businesses and jobs -- a situation that benefits the poorest people while leaving the cost of the risk on the shoulders of the investor. If an investment fails, the investor suffers the loss rather than the innocent taxpayer.

Krugman knows all this of course but he prefers to peddle a one-sided story that conveniently supports his broader political views.

Lee Nason
New Bedford, Massachusetts

+38 # AndreM5 2012-01-20 10:39

Show me ONE BAIN CORPORATION that pays 35% tax! Show me ONE!

+9 # PaineRad 2012-01-20 15:36

The basic premise of a lower rate for capital gains is almost completely fraudulaent. When I buy stocks, not one penny of the price goes to the company to do anything. It goes to the person who owned the stock before I bought it. My purchase did absolutely NOTHING productive. When I get dividends from the company, that is also taxed at 15%. Now I am actually draining assets from the company. Fortunately for the company, dividend expenses are a TINY payout compared to profits. Companies frequently spend far more buying back their stock (which also drains assets) to award it to their officers and directors than they pay out in dividends.

The central rationale for reduced tax rates for capital gains is sheer nonsense 99.9% of the time. The shares we buy from a broker were most likely issued decades ago and have not invessted a single penny in the company ever since.

+2 # ericsongs 2012-01-21 07:29

Wow PaineRad, you really opened my eyes! I had never even considered the ramifications. We have vampires at the fore and leeches at the aft, draining all of the efforts of those employees that actually produce. This system is Grotesque!

+15 # reiverpacific 2012-01-20 10:55

[quote name="lnason@umassd.edu"]Krugman conveniently ignores the fact that the profits from corporations are taxed at 35% (although sometimes less due to congressionally approved loopholes) before being distributed to investors. After the 35% is taken from the top, then the investor pays an additional 15% in capital gains taxes.

This makes the effective tax rate over 40% -- significantly more than the highest tax rate for wage earners who earn all of their income in regular jobs.

Krugman knows all this of course but he prefers to peddle a one-sided story that conveniently supports his broader political views.

Bull-pucky! 40% of $25,000,000 is hardly "Whopping" -to that income level from mostly investment, much of it stashed in offshore tax havens. And Warren Buffet has volunteered to pay more!
And you talk about one-sided!?

+24 # Feral Dogz 2012-01-20 11:12

Corporate profits(money earned doing business) and capital gains(an increase in value of stock or real estate) are two different things. You are mixing apples with oranges and coming up with garbage.

+12 # Bope2 2012-01-20 12:42

Feral Dogz has it right when he makes the distinction between corporate income and capital gains. While there may be some double taxation involved, most capital gains are actually based on anticipated future earnings, and not current net income. Also, investors have three significant advantages over people with ordinary income: First, they can offset capital gains against losses; second, they can time when they pay their taxes, since they only pay tax when the asset is sold; and third, capital gains are exempt from Social Security and Medicare taxes, which together add about 15% to the effective tax rate of most middle class workers. (I know--you will say that the Social Security rate is only 6.2%, but since the employer matches this amount, theoretically, the entire 12.4% would be available for worker pay if it were not paid in FICA tax.)

So, a person at the bottom end of the 35% ordinary income bracket is actually paying something closer to 45% when payroll taxes are included. Meanwhile, the investor enjoys significantly lower rates.

By the same token, most large corporations, which employ armies of accountants and lawyers for this specific purpose, are able to find ways to decrease their effective tax rates much below 35%, making the purported 40% rate grossly overstated. And where's the evidence that low cap gains rates actually create incentives for risk-taking? Endless conservative repetition aside, neither statistics nor experience bear this out.

+1 # barryg 2012-01-20 22:10

Well I am self employed so I pay a 15% SE tax on my bottom line up to about 90,000 I think. So if I have a bad year and make 10 or 20 thou that is relatively a huge tax compared to basic living expenses while if I have a great year and pay 15,000 on 120,000 or 1 million its not much of a big deal

+1 # Bope2 2012-01-21 19:28

Absolutely right, barryg. That's the basis of the philosophy of progressive taxation. The conservative response is that if you increase tax rates, people won't work as hard to make more money because the government takes such a big slice. I suspect it actually works the other way around, at least up to a point (a point that we're nowhere near at the moment). In any case, it's hard to see how any of this applies to folks who make most of their income from capital gains. The tax rate might affect specific sell/buy decisions, but it's hard to see how a lower rate would make them more willing to take risks or to "work harder," whatever that might mean in this context.

+12 # ltsnh1941@gmail.com 2012-01-20 13:13

When you consider that in the past the rich paid a far larger percent of their income (up to 90%) and were still rich, I don't think the 40% you mention is a real hazard to their existence. Folks in Sweden also pay a huge hunk of their income in taxes, but that country seems to be working a lot more equitably than the US. No one needs millions to survive, not unless they want to give parties that cost millions for their wives or children.

+6 # Texas Aggie 2012-01-20 18:19

We keep hearing this baloney about being taxed twice, first the corporation and then the investor. How about my salary? That's also taxed twice and then when I pay out sales tax or property tax, that's a third time. And when the business that I work for collects sales tax on the money that it charges to pay my salary, that's a fourth time, all on the same dollar. I'm just outraged. Aren't you?

Is my example any more stupid than the nitwits who keep yammering about dividends being taxed twice?

+2 # Ralph Averill 2012-01-21 02:42

Mr. Nason is in error in equating profits and capital gains. They are not the same. Capital gains occur only when something is sold at a higher price than the original purchase price. Also, profits, and capital gains, that are re-invested are not taxed at all.
As to the argument about job creation, most of whatever jobs created have gone to Chinese workers.

+30 # JayMagoo 2012-01-20 10:16

If Romney is like other Republicans, he wants America to head back to the place where England was in the 1700s, where there was a tiny group of ultra rich people at the very top who declared that how much they had, whether nor not they deserved it, and how much, if any, taxes they paid, was nobody's damned business. America is heading that way anyway, Romney is just leading the charge.

+9 # Card fan 2012-01-20 13:37

lnason- Let me weigh in - Acme Corp. makes X profit and pays taxes (say 25 % effective rate) on their profit. Am assuming part of this profit is paid out to share holders, i.e., individuals owning shares. Acme Corp. pays its taxes and the shareholder pays his. (15 % rate) Acme paid its taxes and shareholder paid his. There are two parties here, not one so that you can add the two together to get your "40 %". To me it's another example of Republican bamboozlement. Feral Dogz put it best.

-18 # Robt Eagle 2012-01-20 14:03

ReiverPacific: 40% of $25M is $10 million in tax. Obviously you haven't paid a dime in tax, but sure want your share of the entitlements you deserve, eh???

+8 # reiverpacific 2012-01-20 15:01

Quoting Robt Eagle:

ReiverPacific: 40% of $25M is $10 million in tax. Obviously you haven't paid a dime in tax, but sure want your share of the entitlements you deserve, eh???

What a presumptuous load of reactionary-bas ed drivel! You have no idea how much "Self-employmen t" and other tax I've been paying here and while overseas for years. And yes, I appreciate getting it back as earned.
What I dislike deeply is having so much of it go to a destructive and bloated military for illegal and wasteful wars of aggression and saber-rattling.
If I had $250,000,000, I'd be happy to pay 40% -and more- if it would be channeled into benefits for those less fortunate. Incidentally, that quarter-billion is Romney's estimated total wealth (by pundits): if so much of it is stashed in an offshore account or two, he's not paying anywhere near 40%.
But I'll never have 1/4-bil', as in times when I was decently off, I preferred to share it rather than hide it and fund things like our county Animal Shelter, Battered Women's Center, Vets for Peace, local cultural programs and concerts + decent benefits for former employees.
I'm trying to build a once prosperous business back up but can still do volunteer work and get to interact with real people who have been destroyed by the greed-mongers you keep defending as "successful"
So get y'r facts straight before you push all that redneck pap you spew on RSN occasionally, in my direction.

0 # Robt Eagle 2012-01-23 11:28

So charity IS a good thing, especially when it is by choice. Taxing people to provide for those who have made bad choices is ludicrous. Don't tax me for what might be my charitable choice!

+4 # psadave 2012-01-20 16:46

IF Mitt ever produces tax info, keep the changes in the rates and the years they took place in mind. For example, will he show the returns pre-2003 when the rates went to the lowest level? His 'supporters' say he pays the same tax rates on the income from the Cayman accounts! If true, what's the point? It appears un-American to me, no matter what the %.

+5 # Rick Levy 2012-01-20 17:47

Employers do not create jobs from the goodness of their hearts. They "giveth and taketh them" away as production needs change. In order to improve their bottom line, businesses will do more of the latter than the former and in the process will squeeze every drop of productivity from each worker before discarding them. The remaining employees are required to pick up the slack and be thankful that they made the cut.

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