Romney, Taxes for the Rich, and the American Dream

When front runner Republican presidential candidate Mitt Romney revealed his tax status yesterday, he opened himself up to attacks from opponents in his own party and the incumbent Democratic administration, which has championed increased taxes for the rich to help reduce the federal deficit.

In campaign trail remarks Romney said he paid an effective tax rate of 15 percent because most of his income comes from investments, not salary. Romney, whose net worth is reported to be between $190 million and $250 million, benefits from the preferential treatment the IRS gives to investment income as opposed to earned income. The tax break primarily benefits the nation’s wealthiest citizens and has come under fire from groups as diverse as the Occupy Wall Street Movement, purporting to represent the bottom 99 percent of Americans, and a band of the nation’s investor elite led by billionaire Warren Buffett.

President Obama agrees with Warren Buffett who says those who are making millions of dollars should not pay a lower effective tax rate than middle-class Americans, said Jay Carney, White House press secretary in a briefing yesterday. “As Warren Buffett put it, he should not pay a much lower tax rate than his own administrative assistant, his own secretary.”

Romney’s tax rates illuminates the issue, said Carney, “which is that everybody who’s working hard ought to pay their fair share, and that includes millionaires who might be paying an effective tax rate of 15 percent when folks making $50,000 or $75,000 or $100,000 a year are paying much more. He (Obama) thinks we ought to fix that. The President feels very strongly that everybody needs to pay their fair share and that everybody, therefore, gets a fair shot at the American Dream.”

Romney has answered calls to release his tax records by indicating he’s likely to do so in April when this year’s returns are completed. Carney noted that it is an “established tradition” for presidential candidates to release their tax records, one followed by Obama in the 2008 presidential campaign and every year since.

Buffett, chairman and CEO of Berkshire Hathaway, challenged federal legislators to “stop coddling the rich” in an editorial published in The New York Times in August. Buffett has called for an immediate increase on taxes for the rich – Americans making more than $1 million a year - including higher taxes on capital gains and dividends. Obama repeated this call for a new tax on millionaires as part of a plan to trim the federal deficit.

Buffett’s proposed tax reforms appear to have significant support among America’s wealthiest investors. More than two-thirds (67 percent) of Millionaires surveyed in Millionaire Corner in October said they agreed that a tax increase on individuals making more than $1 million a year would improve the current economic situation. Close to half (45 percent) said higher taxes on individuals making more than $250,000 a year would also benefit the economy.

Political pundits note that the Romney campaign has worked hard to overcome the perception that as a successful businessman Romney is out of touch with needs of most Americans. The spotlight on Romney and increased taxes for the rich appears likely to build on the candidate’s elitist image.