Krugman debunks the Romney tax defense

[Spamature]

Romney's Taxes

By Paul Krugman, The New York Times

25 January 12



Just about what we expected. He really needs to provide earlier years, if only to clear up suspicions that he began sanitizing his portfolio in preparation for his presidential run.

The right-wing apologetics now focus on the claim that Romney's taxes aren't really low, because we should impute the taxes that corporations effectively paid on his behalf. But there are at least two things wrong with this argument.

First, $13 million of the total was carried interest, which gets taxed like capital gains but is really just commissions that receive special treatment for no good reason. No profits taxes were paid on that income; right there, a minimally defensible tax code would have levied $2.6 million more in taxes on Romney.

Second, just the other day the usual suspects were calling for big cuts in corporate taxes, arguing that these taxes don't really fall on stockholders, they fall mainly on workers and consumers. Now, suddenly, the taxes fall on stockholders after all. Interesting.

Meanwhile, the Romney campaign is signalling that it's going to try to spin this as "he pays lots of taxes"! How stupid do they think we are? Actually, don't answer that.

Again, the point here is not that Romney did something wrong by paying the low rates current tax law lavishes on people like him. It is, instead, that in an election campaign that will be in part about issues of inequality, the likely GOP candidate is a living, breathing, coupon-clipping example of how favorable our system is to the very rich; and he also happens to be advocating policies that would greatly benefit people like him, while hurting the poor and the middle class.

PS: Yes, my tax rate is a lot higher than Romney's. And I support policies that would raise it further.

 

[OldGaffer]

First, $13 million of the total was carried interest, which gets taxed like capital gains but is really just commissions that receive special treatment for no good reason. No profits taxes were paid on that income; right there, a minimally defensible tax code would have levied $2.6 million more in taxes on Romney.

Does this mean Lukeys double taxation argument is Bullshit?

 

[Spamature]

First, $13 million of the total was carried interest, which gets taxed like capital gains but is really just commissions that receive special treatment for no good reason. No profits taxes were paid on that income; right there, a minimally defensible tax code would have levied $2.6 million more in taxes on Romney.

Does this mean Lukeys double taxation argument is Bullshit?

Looks to be so.

 

[OldGaffer]

Looks to be so.

Thought so from the beginning, but he believes it, and if you believe it, it cant be a lie, right?

 

[Lobato1]

Tax Cheat must provide at least 5 more years of tax returns to clear overlaps

Best Regards
Lobato1

 

[Spamature]

Thought so from the beginning, but he believes it, and if you believe it, it cant be a lie, right?

I am open to being shown how it a lie but I don't think that is going to happen

 

[888888]

whats true is not every corp pays 27% taxes at the corporate level. That's an average and he has no way of knowing how much tax is being paid unless he saw every investment of each year of each company. The money he got paids from Bain was not after tax but was from a contract that paid him income even for businesses that were set up after he left the company.


So on the 42% figure he gets three pinochles and two pants on fire for even suggesting he has any clue as to what Romneys income is taxed at before he gets it.

 

[Lukey]

For "carried interest" to be taxed at 15% it must have resulted from dividend and capital gains. In fact, what it is is a portion of the dividends and capital gains that is transferred to the general partner(s) from the limited partners as part of their compensation for running the investment vehicle. So it is capital gains that only acts like a commission. And frankly Krugman has no idea if taxes were paid on it. While that is possible, it is not a foregone conclusion. As for the corporate taxes falling on the shareholders vs the customers, yes, they will shift these costs to the customers to the extent they can. But if the corporate tax was suddenly eliminated, the money would flow to the shareholders so it is not a stretch to allocate them to the shareholders. Frankly, the double wage taxes a self employed plumber pays will be shifted to his customers as well, but I don't see any effort by the left to suggest plumbers are undertaxed because they make their customers pay their wage (and income) taxes.

So, as usual, Krugman (or perhaps his wife) plays fast and loose with the facts to make an anti-capitalist argument. Two simple observations, a) while there are situations where tax advantaged investment income isn't double taxed, the majority of it is, and that is the income that goes mostly to the mid-sized business owner/operators who create the bulk of the jobs, and the left is hell bent on raising this double taxation (which will have what effect on job creation?) and b) no matter how you slice and dice the left's investment tax increase, it is in each and every case an increase in the taxes charged to the productive members of our population who provide investment capital to the private economy (that pays every last bit of the cost of the federal government), and there is no way to avoid the obvious and irrefutable observation that this will in no way, shape or form, increase the amount of economic activity in the USA, so kiss even more job creation away.

 

[OldGaffer]

while there are situations where tax advantaged investment income isn't double taxed, the majority of it is, and that is the income that goes mostly to the mid-sized business owner/operators who create the bulk of the jobs

I call bullshit on this statement, real estate and stock increases are not double taxed and represent most of the cap gains in this country. Buying Apple at 30 bucks and selling it at 120 bucks nets your ass a huge cap gains, adds not one penny to Apple and the gain has never, ever been taxed for even one penny. Buying a vacant lot and sitting on it for a few years, then selling it for 10 times what you paid is a huge cap gain, never ever been taxed for one cent. Dividend income is the only cap gain that your premise has a leg to stand on, and you cant find many economists that even buy that argument.

 

[ITALIA]

I like Romney's defense that he knows nothing, his investments are in a blind trust so can't be blamed for where his investments are but he also wants to be praised for being a brilliant investor who has made great business decisions and would do the same as President.

 

[Lukey]

I call bullshit on this statement, real estate and stock increases are not double taxed and represent most of the cap gains in this country. Buying Apple at 30 bucks and selling it at 120 bucks nets your ass a huge cap gains, adds not one penny to Apple and the gain has never, ever been taxed for even one penny. Buying a vacant lot and sitting on it for a few years, then selling it for 10 times what you paid is a huge cap gain, never ever been taxed for one cent. Dividend income is the only cap gain that your premise has a leg to stand on, and you cant find many economists that even buy that argument.

The fact is that much of the increase in the price of real estate over time derives from inflation - so why pay a tax on your phantom gains from the government's ongoing currency devaluation? And if you look at Apple's stock valuation, much of it is retained earnings (they have $100 per share in CASH). The fact of the matter is that for most companies, as their stock price rises over time, so does their book value per share. This is because of earnings retained on the books.

The bottom line is that, in your zeal to thwart the speculators you will indiscriminately whack away at the honest, hard working entrpreneurial class. And then when we still don't see any job growth, you will be the first one on here flapping your gums about how capitalism has "failed" once again...

 

[Lobato1]

You are speculating just like all the rest of us.

Therefore only additional years would clear up this speculation

Best Regards
Lobato1

For "carried interest" to be taxed at 15%

it must have resulted from dividend and capital gains.

In fact, what it is is a portion of the dividends and capital gains that is transferred to the general partner(s) from the limited partners as part of their compensation for running the investment vehicle. So it is capital gains that only acts like a commission. And frankly Krugman has no idea if taxes were paid on it. While that is possible, it is not a foregone conclusion. As for the corporate taxes falling on the shareholders vs the customers, yes, they will shift these costs to the customers to the extent they can. But if the corporate tax was suddenly eliminated, the money would flow to the shareholders so it is not a stretch to allocate them to the shareholders. Frankly, the double wage taxes a self employed plumber pays will be shifted to his customers as well, but I don't see any effort by the left to suggest plumbers are undertaxed because they make their customers pay their wage (and income) taxes.

So, as usual, Krugman (or perhaps his wife) plays fast and loose with the facts to make an anti-capitalist argument. Two simple observations, a) while there are situations where tax advantaged investment income isn't double taxed, the majority of it is, and that is the income that goes mostly to the mid-sized business owner/operators who create the bulk of the jobs, and the left is hell bent on raising this double taxation (which will have what effect on job creation?) and b) no matter how you slice and dice the left's investment tax increase, it is in each and every case an increase in the taxes charged to the productive members of our population who provide investment capital to the private economy (that pays every last bit of the cost of the federal government), and there is no way to avoid the obvious and irrefutable observation that this will in no way, shape or form, increase the amount of economic activity in the USA, so kiss even more job creation away.