Mitt Romney, Warren Buffet and the TRUTH about 15% tax rates….By
Much is being made of the fact that Mitt Romney paid an effective rate of 15% in income taxes. Just like the hype when Warren Buffet proclaimed he paid a lower tax rate than his secretary. Is this true- certainly. Is it unfair, probably. However, lets remember two things- one, these are extremely rich guys, you are looking at the exceptions to the rule and that is never a good way to judge the rule itself. Secondly, before we all get on the bandwagon of criticism, we need to at least understand WHY they pay 15% in taxes- or anyone for that matter on their investment income.
The reason they pay so little in taxes is first and foremost because they DO NOT work. Next, we need to understand capital gains taxes and why they were correctly and purposely set at a lower rate. If we want the economy to continue and new businesses to start and grow, it is essential that we provide access to capital. That is the single most important difference between modern and third world economies. So in order to encourage people to take the inherent risk associated with investing, we provide a lower tax rate if it works out. Remember, it will not always work out.
When you go to work, you put in the work and then you get paid. You know exactly when and exactly how much you will get paid. Investors do not know when or if their investment will pay off. There is risk associated with investing. Because some investments will not work out and you will lose your money,when it does work out, you get a lower tax rate. This is essential to keep people investing in the markets and the markets are essential to keep the economy going. So, while those of us, me included, may find it difficult as we file our returns paying nearly double the effective tax rate as Mr. Romney- and on money we had to work hard for to boot- we need to remember that the economy and country as w hole benefit greatly from the lower capital gains tax.
Leave a Reply
You must be logged in to post a comment.