Observations on Mitt Romney’s Tax Returns
Republican White House hopeful Mitt Romney released his 2010 income tax return today, after weeks of pressure from the media and his GOP rivals. In reading various reactions to the release of this data, there are a few reoccurring discussion items that I want to draw attention to, and hopefully diminish.
Misconception: Since Mitt Romney held investments in offshore funds, he must have been trying to hide money from the IRS.
Reality: There is nothing illegal about investing or holding money in banks that are located in other countries. If he was trying to hide money, why would he disclose it to the IRS?
Misconception: Mitt Romney’s effective tax rate was only 14%. This goes to show that the richest American’s who run the biggest companies continue to pay the lowest tax rate.
Reality: While Romney’s effective tax rate of 14% is low, people need to remember that he didn’t earn this off of wages. His income in 2010 was mainly from capital gains through his various investments. However, in the interest of discussion, even if his effective tax rate was 14%, and wage based, there is still an angry, greedy, vile, and capitalistic group of Americans paying a lower tax rate.
Is it big oil? No. Big Tobacco? No.
Those greedy jerks that pay less in taxes than Mitt Romney… small business owners, specifically sole proprietors. That’s right, according to the United States Small Business Administration (SBA), the average effective tax rate for a sole proprietor is 13.3%:
The effective federal income tax rate faced by small businesses varies by the legal form of organization, according to a report issued today by the Office of Advocacy of the U.S. Small Business Administration. Average rates range from 13.3 percent for sole proprietorships to 26.9 percent for S corporations. The effective federal income tax rate is the actual amount of taxes paid by a firm as a percent of its net income.
If you’re thinking to yourself, “well, business owners are still a small segment of the population… the majority have to pay a much higher tax rate,” you’re wrong. Even at 14%, Romney still pays a higher rate than 97% of Americans.
From the Tax Foundation:
“Based on the most recent IRS data for 2009, the average tax rate (after deductions) paid by all Americans is 11 percent. It is also clear that millionaires pay an average of 25 percent, while virtually every taxpayer earning under $100,000 pays an average rate of no more than 8 percent of their income in taxes.”
If anything, it’s the “1%” that should be angry at Romney, not the average voter.