When President Obama released his plan to implement the “Buffett rule” — which would ensure that millionaires can’t pay a lower tax rate than middle-class families — 2012 GOP presidential hopeful Mitt Romney derided it as “class warfare,” saying it is “simply the wrong way to go.” But as Time’s Michael Scherer pointed out today, Romney may have a tough time defending his opposition to the Buffett Rule, as one of its highest profile targets could well be…Romney himself:
Just how much Romney pays in taxes is, for the moment, a private matter. But his income is public knowledge. In August, Romney disclosed that in 2010 he and his wife made between $1.1 million and $2.8 million in royalties, salary, speaking fees and interest, most of which was likely taxed at a marginal rate of 35%, after accounting for deductions. The Romneys made an additional $5.5 million to $37.3 million from dividends and capital gains, which is generally taxed at a much lower rate of 15%.
Calculating the Romneys’ exact tax burden is not possible from the public records because of a number of factors, like the amount of money that Romney deducted from his taxes and the length of time that he owned investments, are unknown. But ballpark estimates are possible. Assuming that Romney declared roughly the same number of deductions as others in his income level and that his dividend and capital gains income qualified for the 15% bracket, Romney would have paid roughly 14% of his gross income in taxes to the federal government in 2010 according to Bob McIntyre, who crafts tax policy at the left-leaning Citizens for Tax Justice.
The Buffett Rule is meant to prevent exactly this sort of circumstance, wherein a super wealthy individual, due to the preferential tax treatment of investment income, is able to dramatically lower his or her tax rate. If Romney’s income had been wages or salary instead of from investments, his tax rate would have been closer to 30 percent.
In 2009, “1,470 households reported income of more than $1 million in 2009 but paid zero federal income tax on it.” In 2008, the average federal income tax rate of the richest 400 people in the country was 18.11 percent. And Romney, by arguing against the Buffett Rule, will be saying that this sort of tax system, from which he directly benefits in a big way, should stay in place.