25 January 2012

Romney Scrabble

US tax policy rewards Do-Nothing Income and penalizes Earned Income.

7,000 millionaires paid no income taxes in 2011.

Recently Republicans vetting would-be Presidential candidates had to reconcile a Do-Nothing Income candidate called Mitt, who made millions and paid a 13.9% tax rate on Do-Nothing investment income, and an Earned Income candidate called Newt, who made millions and paid a 31% tax rate on Earned Income.

Since most Republicans rely on Earned Income, the inequity of a significantly lower tax rate on Do-Nothing Income might have come as a shock. Particularly since Republicans historically support regressive tax policy that favors the super rich -- i.e., the fortunate layabouts who no longer have to work to earn an income.

Republicans consistently vote against their best interest as if it's a pesky flaw encoded in their DNA. By all accounts, the low Do-Nothing tax rate candidate should be the runaway 2012 Republican hero. After all, Republicans hate high taxes and the Do-Nothing candidate pays half the tax rate of most Republicans.

Perhaps it will dawn on the Republican faithful that the Earned Income candidate is ever-so-slightly more aligned with their reality - doing a job, getting paid for it, and paying taxes on earned income.

Few would begrudge a person who'd acquired enormous financial wealth to kick back on easy street, but what sense does it make for a billionaire to pay a lower tax rate his valet, his chauffeur, or his gardener?

Why not entertain the notion that a tax plan can be equitable across income levels (e.g., rules of thumb like The Buffet Rule)?

Thought Experiment - Romney Scrabble

Imagine you're approaching the end of a Scrabble game and by chance you find yourself with r-o-m-n-e-y on your tile rack.
Screw the r and place m-o-n-e-y on the board.  
Now take a moment to consider how US tax policy allows folks like Mitt Romney to make $21.7 million in investment income in a single year then pay a paltry 13.9% tax rate while ordinary Earned Income schlubs, like you and me, are on the hook for double that rate.

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