Mitt's new math
RAMOS: You just released your tax returns. In 2010 you only paid 13 percent of taxes while most Americans paid much more than that. Is that fair?
ROMNEY: Well, actually, I released two years of taxes and I think the average is almost 15 percent. And then also, on top of that, I gave another more 15 percent to charity. When you add it together with all of the taxes and the charity, partiularly in the last year, I think it reaches almost 40 percent that I gave back to the community. One of the reasons why we have a lower tax rate on capital gains is because capital gains are also being taxed at the corporate level. So as businesses earn profits, that’s taxed at 35 percent, then as they distribute those profits as dividends, that’s taxed at 15 percent more. So, all total, the tax rate is really closer to 45 or 50 percent.
RAMOS: But is it fair what you pay, 13 percent, while most pay much more than that?
ROMNEY: Well, again, I go back to the point that the, that the funds are being taxed twice at two different levels.
Romney's really claiming two things here.
First, he's saying that he gives 40 percent of his income "to the community" in the form of taxes and charitable deductions. (I'm not sure how he gets to 40 percent, given that he says he's adding 15 percent and 15 percent, however. And given that two-thirds of his charitable donations go to the Mormon Church that bankrolled Proposition 8, you can question how much the community benefited, but I digress.)
Second, he's saying that thanks to the nominal corporate tax rate of 35 percent, he's actually paying 50 percent in taxes when you add in his 15 percent. Now, if he really believed that he was paying 50 percent in taxes, he wouldn't have said he gives back 40 percent to the community—he'd have said he gives back 75 percent. But he doesn't really believe what he's saying ... because it is patently absurd.
Paul Krugman has an excellent dismantling of the case Romney is trying to make regarding corporate taxes. First, because most of Romney's capital gains income comes by way of carried interest, it was never previously taxed at 35 percent. Second, almost no companies actually pay the nominal corporate tax rate. Third, even if it were fair to say that the income had previously been taxed at 35 percent rate, conservatives have long argued that corporate taxes come at the expense of worker's wages. Now, suddenly, they are saying it comes at the expensive of investors? Talk about double-counting!
The bottom-line: No matter how you slice it, Mitt Romney is full of baloney on this.