Mitt Romney last week dumped his 2011 tax return on Friday afternoon. They showed that he paid a 14.1 percent rate, which was actually several points higher than he would have owed had he taken advantage of all the deductions for which he qualified. Romney’s rate is lower than that of many middle class families, and lower even than large portions of the “47 percent” Romney derides.
Romney’s rate is so low because the lion’s share of his income comes from investments, which are taxed at the 15 percent capital gains rate, far below the top federal income tax rate of 35 percent. In an interview with 60 Minutes that aired Sunday night, Romney said it was “fair” that the capital gains tax rate is so low, because “I think it’s the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work.”
How much did this tax break save Romney exactly? $1.2 million last year alone, according to Citizens for Tax Justice:
First there was the Congressional hearing last Thursday, then the release of Republican Presidential candidate Mitt Romney’s 2011 tax return on Friday. While one of them was big news and the other not so much, both events highlight the biggest subsidy high-income taxpayers get from the tax system – the preferential rate on capital gains and dividends. While we tax “ordinary” income such as salary and wages at rates up to 35 percent, capital gains and dividends are never taxed higher than 15 percent. [...]
A CTJ review of Romney’s 2011 federal income tax return found that he saved $1.2 million in federal income taxes in 2011 because of the preferential capital gains tax rate. Without that special break, he would have paid total federal income taxes of $3.1 million and his tax rate would have been almost 23 percent.
The case for a low capital gains tax rate is dubious at best. And Romney himself made the case against a low capital gains rate, since he made his fortune via investments when the rate was much higher than it is today. As David Abromowitz explained at Bloomberg, “all of the investments made by Bain Capital LLC, the private-equity company Romney cofounded in 1984 and ran until 1999, occurred when capital-gains rates were much higher than they are today. Yet Bain consistently attracted massive amounts of private capital, and thrived.”