Mitt Romney and the Tax Zombies

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Dow up 96 yesterday. Gold up $4. Oil above $100. Nothing special to report, in other words.

Mitt Romney has revealed his effective tax rate. “About 15%,” he says.

That seems like more than enough to us. But it’s not enough to satisfy the zombies. Romney has made a lot of money. They want more of it.

It turns out that 15% is lower than average. The AP reports:

At 15 per cent, Romney’s federal income tax rate would still be higher than the rate paid by many Americans.

On average, households making between $50,000 and $75,000 will pay a federal income tax rate of 5.7 per cent this year, according to projections by the Tax Policy Centre, a Washington think tank.

However, when Social Security and other taxes are included, that same household would pay an average federal tax rate of 16.6 per cent.

Overall, the average American household will pay 9.3 per cent in federal income taxes – and 19.7 per cent in all federal taxes.

Romney’s wealth – he is worth between $190 million and $250 million – puts him among the richest Americans. But if most of his income is from investments, it could help him to significantly lower his federal tax bill compared to people who make money in other ways.

While the top federal tax rate for investment income – qualified dividends and long-term capital gains – is 15 per cent, the top tax rate for wages is 35 per cent on taxable income above $388,350. Wages are also subject to Social Security and Medicare payroll taxes, while investment earnings are not.

Newt Gingrich has suggested a flat tax rate of 15%, which he now proposes to call the “Romney Tax.”

But the zombies not only want a higher rate (so they can squeeze the producers a bit harder) they also don’t want a flat tax. They prefer a confusing, complex, and ever-changing tax code, with 10,000 rules and 20,000 exceptions. Why? Three reasons:

First, complexity provides rich cover in which to hide special favours and privileges.

Second, the more special favours available, the more campaign contributions, donations, job offers and speaking fees Congress can count on.

Third, and don’t forget the lawyers and accountants – the corrupt insiders – who make money by helping lay the mines…and then helping taxpayers get through the minefields without blowing up. Sure, you could replace the government’s revenue with a much simpler tax system…but you’d inconvenience the zombies.

In short, the tax system is completely corrupt. It is a drag on the whole economy…but it serves the zombies well.

Regards,

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Mikie
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Does the US want to pay its bills?

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