Recently on the Matt Lauer Show, Mitt said people talk about inequality because “they’re envious”:
“You know, I think it’s about envy. I think it’s about class warfare”. What kind of class warfare are we waging on the poor (rich) man? He has been benefiting from the largess of the American people through our elected officials.
Mitt Romney released his tax returns a few days ago. All 550 pages! Now we know why he was reluctant to do so earlier. The good news is, he makes a very handsome chunk of change for some who tells us he feels our pain, “I should tell my story,” Mr. Romney said. “I’m also unemployed.” If I had made $42,000,000 in the past two years, I am not sure I would be concerned with being unemployed, especially while conversing with the unemployed folks in Florida. The bad news for Mitt – he just made himself the “Poster Child” for the .001 percent who want to reduce the capital gains rate even lower. His 13.9 percent tax rate shows how unfair our tax laws are to the working class. This is where lobbying money is well spent for the Plutocracy. If Mitt wasn’t running for President we would not have the good fortune to see inside the advantages of the Investor Class. And when you have a government made up of rich people and people whose financial lives are defined by what they own, you have a government that reflects the interests and beliefs of the ownership class (Plutocracy).
I am all for people being able to earn money, have enough to live on and save for investments. The problem for the extreme majority, it’s been challenging to earn a living wage these last 30 years. Our wages have actually gone down, not up. Our dollar buys less because of the way inflation is calculated. The debt of our nation, 40 cents on every dollar spent, makes our money worth less. After being adjusted for real inflation, average hourly earnings have not increased in 50 years.
I wrote a few days ago about the tax plans of the Republican candidates. Mitt’s example is a great opportunity to explain what is going on and why lowering capital gains taxes is NOT a good idea. Mitt and his wife Ann earn most of their income from investment profits, dividends and interest, unlike most working class Americans who go to work every day. Their effective tax rate was 13.9 percent in 2010. They expect to pay a 15.4 percent effective tax rate when they file their returns for 2011.
$13 million of Romney’s income over the past two years came from “carried interest,” a form of earnings that is available to private equity partners and taxed at the 15-percent investment income tax rate, not the higher wage income rate. If his wage income was taxed like ours, in his wheeling and dealing of deals, in my mind that’s working, therefore wage income. But he gets to use the carried interest rule, we don’t. This is one vehicle that has helped the .001 percent get richer FASTER. Carried interest was structured as a form of compensation to be an incentive to the manager to maximize performance of the investment fund. In a hedge fund environment, carried interest is usually referred to as a “performance fee”.
The “carried interest” provision of the U.S.tax code has repeatedly been targeted for elimination by Democrats who say it is unfair, even though it was passed 3 times by a Democratic House of Representatives since 2007, while the private equity industry defends it. The rates he paid legally are far below the 35 percent income tax rate on wages, because the U.S. tax code in recent years has favored investment income over wage income (Who do our elected officials work for?).
A few facts:
- Romney states his income from “carried interest” was already taxed in the corporation. NOT true, he is the corporation. The money was not taxed until he took it out. Some could argue this is wage earnings, but clearly there are ways to say otherwise. The tax treatment of carried interest under current law allows managers of hedge funds, private-equity funds, venture-capital funds and others to pay a lower 15% maximum income tax rate applied to investment income as capital gains, rather than higher income tax rates for ordinary income which exceed 35%. This is a huge difference.
- In 2003, dividends paid by most corporations became taxable as long-term capital gains. The 15% and 5% capital gains rate applies to qualified dividends. Long-term capital gains were taxed at 28 percent until 1997, and at 20 percent until 2003, when rates were cut to 15 percent. The top rate on dividends was cut to 15 percent from 35 percent that year. This change in tax rates for capital gains and dividends is another of the tools that has fueled the fast growth for the wealthy. That’s another 15 percent return on their money every year. How many of you have made that much on an investment recently, or received a 15 percent salary increase every year since 2003? Once this law changed, corporations changed how they compensated employees and executives. Salaries were paid in dividends, taxable at 15 percent. Or they were given stock options. Salaries for Corporate executives exploded – 300 percent since 1990, while workers wages have gone down.
I wrote the other day why it’s so important to pay attention to the tax plans these guys are touting. Mitt Romney said, by way of criticizing Newt Gingrich’s tax plan, that he, Romney, wouldn’t pay any taxes under it! Under Newt’s plan, there would be no tax, none, that would be zero percent, on capital gains.
I am angry because the people we elected to office voted for the laws that allowed this to happen. I am getting really tired of hearing our elected officials don’t have any other choice because they have to raise money for re-election. Why aren’t they speaking about this? We elected them, we pay their salaries. Why are they the victims in this? Did someone hold a gun to their head? Aside from Bernie Sanders, why aren’t they doing something about this?
What are we doing about this?