If I had the opportunity to ask Mitt Romney a question, ah-la the Townhall debate format, face-to-face, this is what I'd ask:
Mr. Romney, how would your very own tax plan effect your very own taxes?
Lost in the hyperbole about tax rates and holding them steady or lowering these and raising those, lost in the hubbub of closing loopholes and offering everybody a certain dollar amount of automatic deductions is this: Mitt Romney wants dividends and capital gains to be taxed at 0%. Nada. Zippo. Nothing.
Let's look at the math.
Two years ago, Mitt Romney paid a tax rate of 13% on over $30,000,000 of earnings. Last year it was 14% on $20,000,000. Most of those millions came in the form of dividends and distributed capital gains. If he has his way, his tax rate on $50,000,000 in two years would be approximately 1%. That's $500,000.
Does this seem fair?
Does this seem patriotic?
The fact is that most Americans don't pay capital gains taxes. For those who have investments, they are in "qualified" retirement accounts like IRAs and 401(k)s. There are no such things as capital gains in qualified accounts because the accounts, by definition, are tax deferred. This rule of 0%, only meaningfully effects people with big investment accounts. People like him.
As a complete aside, I did the math on his massive $100,000,000 IRA. One thing that Romney will be unable to defer is the required minimum distribution when he hits 70.5 years of age (he's 65 right now). Assuming his IRA earns 10% (which is considerably lower than it had to average all these years to grow to $100M), it will roughly double by the time he's 70.5 years old.
If you look up the Uniform Table as provided by the IRS, he will have to divide his huge IRA balance by 27.4 that first year where he is mandated to take money out of his account. That will be $200,000,000 / 27.4 = $7,299,270.07.
That means he will be required to take out $7.3M --- all of it subject to ordinary income tax. If the rates stay the same as today, 35% [and this isn't precise because of the progressive tax schedule, but it's close enough], he will end up paying $2,554,744 in taxes. This brings me a little comfort. Not much. Just a wee bit. Because there isn't much he can do about it. The very act of taking a distribution from an IRA is taxable.
But he has an awesome accountant. I'm sure he'll find some way to gift it away to the Mormon church. Far away from where it could do some real good for the rest of us.