Be honest: Do you pay more than Mitt?
Be honest: Do you pay more than Mitt?
The release of Mitt Romney’s tax returns — the news he paid 13.9 percent of his earnings in income taxes — has rocketed one of my pet crusades back to the top of the charts.
Which is: We are clueless how low our taxes really are.
Apparently many of my brethren in the media must pay more in taxes than Mitt. A lot more. Because his taxes were described in most headlines this week as “low,” and his effective tax rate as “only” 13.9 percent. Some portrayed his burden as “startlingly light” (New York Times’ Paul Krugman.)
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The tax man must also gouge Democrats much deeper than Mitt. Because they responded as if Romney — who paid $3 million on earnings of $21.7 million in 2010 — is a freeloader.
“Mitt Romney used every loophole in the book available to the wealthiest and large corporations to avoid paying his fair share,” said the Democratic National Committee.
“The president believes that it is not fair — inherently not fair — that millionaires and billionaires pay at a lower rate than average Americans who are struggling to get by,” said President Obama’s press secretary.
Even some Republicans ribbed Romney. Newt Gingrich offered to name his 15 percent flat-tax plan the Mitt Tax. So that “all Americans could then pay the rate Romney paid. I think that’s terrific.”
I must be some sort of slacker, because I have to admit: I pay less than Mitt. I’m not going to release my tax returns until I make my run for president, so for now you’ll just have to believe me. But I do routinely pay a lower effective federal tax rate than the lowly Mitt
But here’s the thing: So, most likely, do you. Because according to the IRS, more than 90 percent of Americans pay at a lower effective rate than Mitt.
What we’re talking about here is the taxes people actually pay, after you get done with all the deductions, exemptions, credits and refunds. (The rate is figured by taxes paid divided by adjusted gross income.) What Romney released was just his federal income taxes, so not included are payroll taxes (Social Security, etc.), corporate taxes or state and local taxes.
Average Americans may indeed be “struggling to get by,” but it surely isn’t due to federal income taxes. They are at their lowest point as a share of the national economy in 60 years. And not just for the rich. Nearly half of Americans either pay zero income taxes or get tax credits.
I pay less than Mitt in part because I don’t make that much money (especially compared to him). But mostly it’s because Congress has relentlessly cut taxes for more than a decade, granting big breaks for owning homes or credits for things like raising children.
Individual taxes vary widely. But Romney’s 13.9 percent effective rate is higher than the average effective rate paid by all but the top 5 percent of U.S. taxpayers.
That’s according to IRS data from 2009, the most recent year available. (Although his rate is lower than the average for his rarefied group, the top 1 percent, which was 24 percent.)
Obama and Warren Buffett keep saying that struggling middle-class Americans (like me!) pay at rates twice as high as the rich. But at the federal level, this just isn’t true.
We do pay a much higher portion of income in Social Security and Medicare taxes than do seven- or eight-figure moguls like Romney.
But Romney’s tax return did not include whatever hit he gets from corporate taxes (which the nonpartisan Tax Policy Center says adds about 8 to 10 percent on average to the effective tax rates of investment-heavy financiers such as Romney).
So what is the take-away from all this?
To me it reveals the core disconnect of national politics right now. We think we’re overtaxed. We’re not. We think 13.9 percent is low. But compared to the rest of us, it isn’t.
We also think we can solve our problems by just dinging the rich. We can’t.
Yet these will be the only choices on the ballot.
Danny Westneat’s column appears Wednesday and Sunday. Reach him at 206-464-2086 or firstname.lastname@example.org.