Mitt Romney payed less than 15% on his REPORTED income. What if his REPORTED income is actually far less than his real income, and it is all legal?
When Romney donates an appreciated asset to charity, he gets to deduct the full value from his income in the calculation of his net income. That means he gets to deduct what he paid for the asset plus whatever capital gain has occurred while he owned it.
He is not required to declare the appreciation in the asset as income and he has never paid taxes on that appreciation. However, he is allowed to use that appreciation to cut his taxes on his REPORTED income.
In other words, he has far more income than he is legally required to REPORT, and he gets to use that unreported, untaxed income to cut his taxes on his reported income. This is in effect a negative tax rate. The more the asset appreciates (the more he earns) the less he pays in taxes.
So not only does he tell you about his unfair lower tax rate than the tax rate paid by the ordinary, middle-class tax payer, he also has to report far less of his income than does the ordinary, middle-class taxpayer. Even Warren Buffet, who tells you it is unfair that he pays a lower tax rate than his secretary does, doesn’t tell you the full story of how much less he pays.
This is just another trick played on the middle-class by the very wealthy. You can use this trick too, but I am not sure if any of my readers can make millions of dollars a year, year after year, using this trick.
What do you think of a candidate who uses these tricks and yet pretends to the voters that they do not exist and that he doesn’t know about them?
The middle-class voter knows that she or he is being ripped off, but they don’t know the half of it. Would they appreciate a candidate that told them about the half they don’t know?
This is the same issue I mentioned in Comparing Taxes Paid By Past Presidents and Presidential Candidates. The facts about how to use this tax trick are documented in Donate Appreciated Assets.
I repost this because I think this way of stating it has far more impact than the description in my previous post. The headline is more catchy, too.