Monday, July 2, 2012

Mitt Romney's $5.46 million dollars created how many new tax payers?

First off, let me get this out of the way.  If I were in Romney's shoes, I would make the same statement he made:
“You’ll see my income, how much taxes I’ve paid, how much I’ve paid to charity. I pay all the taxes that are legally required and not a dollar more. 
The argument I want to make in this post is not on how much, or how little, Romney pays in Federal taxes, it is simply about whether the money he keeps from not being taxed 39% instead of 15% is used to create jobs that create new tax payers that then provide the revenue for the government.  That's the only way the Marco Rubio's model of "the only solution is growth" will work as a means for funding our current governmental needs and paying down the debt.

If the money Mr. Romney keeps is not used to produce new tax payers than the government will continue to run a deficit and the debt will increase.  Period.

According to CNN:
Romney and his wife, Ann, filed a joint 1040 reporting $21.7 million in 2010 income and $3 million in federal taxes. They also said their 2011 income was $21 million and tax bill was $3.2 million.
That is an effective Federal tax rate of 13.8 percent.  If, as one of those making greater than $250,000 Romney were to be taxed at 39% as proposed, the government would see an increase in its revenue of $5.46 million dollars from the Romney's.

The argument made by Rubio is that the $5.46 million is better left in the Romney's hands than given to the government.  Hard to disagree on that principle, but...the Rubio model of "growth is the only way" to manage the deficit and pay down the debt is predicated on the United States increasing the number of tax payers.

That can be done in one of two way:  1. Employee those who are currently not employed and go from zero income tax to some income tax being paid.  2. Increase the salaries and take home pay of those currently working.

The problem with those two requirements is that they run counter to what the business person has been trained to do for his/her company.  That is, do as much as possible for as little money as possible.  This, along with the common notion that the largest cost to a business is labor, puts the business in a position to drive down wages and employee as few employees as possible.

So if a guy like Romney, one of those "one precenter" types is also going to be called a "job creator" then how will his income - which is investment income - be affected by increasing the cost to the business by adding jobs or increasing the pay?

According to CNN:
The reason Romney's rate is so low -- despite having one of the highest incomes in the country -- is because his income was derived almost entirely from capital gains and dividends from his extensive portfolio of investments. And that form of investment income is typically taxed at just 15%, well below the 35% top tax rate for high earners.
So can guys like Romney be "job creators" when their income is derived from investments that are predicated on keeping costs low?  Theoretically they can, assuming that there is constant growth so that the demand drives the need for more employees and higher wages.  Without that demand, however, we are at the mercy of guys like Romney who control the money needed to invest in new business, education, and infrastructure to get those goods to market.

So back to my question: Did the $5.46 Romney got to keep because he does not have to pay a 39% tax rate create more new jobs and higher wages to make this model - the one Rubio swears by - more effective than what would be done with that money had it gone to the government as additional taxes?

Now it is easy to get lost in the taxes part of the discussion.  No one wants to pay taxes and everyone wants to pay as little taxes as they can.  But the fact of the matter is, if you live in a democracy you must pay for the services that democracy provides.

This is not a debate on what is a fair tax.  Romney says “I’m proud of the fact that I pay a lot of taxes.” And that he does, but is it enough to pay for the government that he, I and you (if you live in the US) benefit from?

At this point in time we have both a deficit and a debt that is dragging our country down.  If Rubio is correct and letting guys like Romney keep that money so they can invest it and create new tax payers, then we need to see some proof that that is indeed what is being done with that money.

Why?  Because we know that the government does create new jobs through job programs as well as investing in new technology and education for the future.  The government does this with tax revenues from guys like Mitt Romney.  Rubio and his cohorts contend that guys like Romney do the same thing, and they do it better.

Do they?

Next post:  Does Mitt Romney's income come from investments that help Americans?


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