Mitt Romney has bank accounts flung across the globe; The Washington Post noted a few countries where he has them, including Luxembourg, Ireland, Cayman Islands, and, until 2010, Switzerland, which is a notorious tax haven.
I’m not suggesting that Romney has done anything untoward when it comes to his taxes. On the contrary, it looks as though he has toed the legal line extremely well. But therein lies his problem:
(1) If the system as is benefits people like Romney so much, what is the motivation for him to change the tax code? Clearly he’s doing just fine.
(2) How exactly will Romney make the argument that the average American is overtaxed? He’s not one of them. And most wealthy people in his position are paying a similarly low effective tax rate. How can he help the middle class with tax woes?
That’s not to say some folks aren’t overtaxed but the remedies Republicans typically propose would do very little to help those particular people, who are in the middle class. Why? Because their focus is primarily on the investor class, the group of folks who bring in the majority of their earnings through capital gains (stock earnings, real estate earnings, etc). But maybe I’m missing something and capital gains accounts for a large percentage of the average American’s annual income. Nope. The Center on Budget and Priorities finds that: “[f]or those making less than $100,000, capital gains and dividend income makes up an average of 1.4 percent of total income.” Even when including millionaires in the discussion, those earning up to $1 million annually, only 12% of their income consists of capital gains.
So who is it that is benefiting the most from capital gains? The ultra wealthy. The 1%. Which isn’t necessarily an indictment on them. There’s a legitimate argument to be had regarding what the investor class pays in taxes and how those taxes should be structured. What isn’t appropriate is for the Romneys and Gingriches of the world to try to convince the average voter that lowering capital gains taxes is going to help the “small businessman” or the average person who owns a few shares of Microsoft.
The GOP loves to point out that over half of Americans own stock. This is true but it doesn’t take into account that two-thirds of this stock ownership is housed within 401K investment plans and other retirement accounts, where dividends accruing are not subject to taxation.
And what about the argument that eventually the middle class will retire and be the beneficiaries of this stock wealth largesse? Not so fast. Turns out that:
“Over half — 54 percent — of all capital gains and dividend income flows to the 0.2 percent of households with annual incomes over $1 million. More than three-quarters — 78 percent — of this income goes to those households with income over $200,000, which account for about 3 percent of all households,” according to the Center on Budget and Priorities.
So Democrats need not get dragged into the age-old and very tired debate of rich = evil and poor = good. Instead, ask Romney those two questions and stick to the facts: He’s not the guy voters should trust to change a system that benefits him more than any other system could.
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