| Warfish |
09-25-2012 08:47 PM |
Fact Check: Is Romney's tax rate really lower than yours?
Quote:
President Obama's campaign, with a good dose of help from the media, is pushing a claim that millionaire Mitt Romney is taxed at a "lower rate" than someone making $50,000 a year.
The claim, though, is open to debate. It only holds up in a particular scenario in which both income and all payroll taxes are counted.
The president's campaign presumably is referring to Romney's release last week of his 2011 tax returns, which showed he paid an effective tax rate of 14.1 percent.
This revelation, as might be expected, fueled a wave of campaign stump speeches and videos. The latest was an Obama Web video blasting Romney's "strange take on tax fairness." It included clips of people accusing Romney of paying a lower rate than "average" Americans. An accompanying campaign email said: "Mitt Romney admitted he thinks it's fair that his $20 million income was taxed at a lower rate than someone making $50,000."
IRS data, though, shows that Romney's effective income tax rate -- that's what he pays as a percentage of his income once deductions and other benefits are factored in -- is actually far higher than what most Americans pay.
And it's certainly higher than what someone making $50,000 pays.
IRS data from 2010 shows someone making between $50,000 and $75,000 on average pays an effective rate of 7.8 percent. Even someone making between $100,000 and $200,000 pays a 12.1 percent rate -- also lower than Romney's.
So what is the Obama campaign referring to? There are a couple possibilities.
The campaign likely is trying to make the point that Romney's income -- at least the huge chunk of it that is derived from investments -- is taxed at a 15 percent rate, while others who earn their money from a paycheck are taxed at marginal income rates going all the way up to 35 percent.
The latter percentage, though, comes down once deductions and exemptions are included. The Tax Foundation estimated in a report in January that Romney's rate in 2010 -- which was also about 14 percent -- was higher than what 97 percent of Americans pay.
The math works out better for the Obama campaign's claims if all payroll taxes are included in the formula.
Since Romney earns most his income from investments and not from a paycheck, he doesn't have to pay much toward Social Security and Medicare taxes. But if both the employee and employer share of those taxes are included, according to a Tax Policy Center chart, the middle tier of earners would be paying a 15.5 percent effective rate. (As pointed out in an earlier report by FactCheck.org.)
That would be slightly higher than Romney's rate.
The Obama campaign, asked about its latest Web video, told FoxNews.com "you can't ignore the payroll tax" considering how big of a hit that is for most middle-class families.
The Obama campaign also referred FoxNews.com to Romney's comments to CBS' "60 Minutes.
In the interview, Romney was asked by reporter Scott Pelley whether Romney's rate is "fair to the guy who makes $50,000 and paid a higher rate than you did?"
Without disputing that claim, Romney said it was fair and explained: "It is a low rate. And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35 percent."
The claim by Pelley, though, made certain assumptions without explaining them.
Obama used Pelley's phrasing to repeat the claim Monday on ABC's "The View."
"Yesterday Governor Romney on 60 Minutes said -- was asked does he think it is fair that he pays a lower tax rate than somebody that's making $50,000 a year, and he said yes," Obama said.
As the Media Research Center pointed out, an ABC reporter also claimed that Romney's 14.1 percent rate was "lower" than that of an auto mechanic making $75,000.
While Romney may or may not pay less than the average middle-class earner -- depending on how one defines middle class and how one defines tax rate -- one thing is clear: Romney does pay at a lower rate than the typical wealthy person.
IRS data for 2010 showed those making between $1 million and $10 million typically paid at an effective tax rate of more than 25 percent.
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Read more: http://www.foxnews.com/politics/2012...#ixzz27X4DDRbh |
