A wealthy businessman is running on the Republican ticket for U.S. Senate in Massachusetts, but he has a problem: he thinks he should get to play by different tax rules than the rest of us.
I could be talking about Mitt Romney, who ran unsuccessfully against U.S. Senator Ted Kennedy in the Bay State’s 1994 election. Or I could be talking about what’s going on right now in 2013.
Gabriel Gomez, a private equity investor who made his fortune working with companies like upscale apparel store Lululemon, is the Republican nominee to succeed former senator and current Secretary of State John Kerry. The Massachusetts special election will be held on June 25. And he has more in common with Mitt Romney than you think.
A special rate for some
During the presidential campaign, we learned a lot about Mitt Romney’s tax rate, which was effectively 14 percent in 2011 despite making $13.7 million that year. (For context, a single person making $50,000 paid roughly 23 percent that year.) This is because much of Romney’s income came from stock dividends and investments rather than salary, which are taxed under a lower rate for “capital gains.”
President Obama proposed changing this with the “Buffett Rule,” which would ensure those making $1 million or more a year wouldn’t pay a lower rate than middle class families. Romney rejected that proposal, calling it a “gimmick,” and a 45 Republican Senators blocked the proposal for even coming up for debate.
Free money for not breaking the law
As a fellow investor, Gomez also made much of his income in the form of capital gains, allowing him to pay that lower tax rate than those of us who earn wages – but that’s not all. In 2005, he also used a special deduction to effectively pay $281,500 less in taxes for doing…nothing.
That’s right. In 2005, Gomez claimed a deduction for making “no visible changes” to the façade of his 112-year old home in Cohasset, Massachusetts. Using a federal tax loophole, Gomez claimed this as a charitable contribution to protect historic homes. So poof! An extra $281,500 in the bank.
Here’s the catch: local laws already prohibited Gomez from making changes to his historic home. In other words, Gomez saved over five times the median household income in the United States just by not doing something that was illegal.
Gomez isn’t the only one who has pulled this trick. The IRS considers it one of the “Dirty Dozen” of most common tax cheats, and the organization that Gomez made the easement to has been targeted by the Department of Justice.
There were many reasons the American people rejected a potential President Romney last year, but certainly the idea that he saw no problem with keeping special breaks for a wealthy few was one of them. Gabriel Gomez has demonstrated that he feels the same way: first by making a fortune thanks to the special capital gains tax rate, and then by exploiting a loophole to maneuver an extra $281,500 into his bank account.
We need less of this greedy maneuvering and exploitation, not more.
by Doug Foote - Reposted from Working America's Main Street Blog