Friday, January 6, 2012

The Buffett Effect: An Analysis of Why Mitt Romney is Not Releasing his Tax Returns

TPM has an interesting analysis as to what Governor Romney's tax returns almost certainly show:  Like most high net worth people, very simply a lot of income generated from long-term capital gains and dividends, both taxed (at the federal level) at 15% and throw in a reasonable amount of tax free muni bonds, and TPM guesstimates an effective rate for the Romney's at 14%, which would put them at a similar rate of your average W-2'er who earns $60,000.  Kind of a silly result, but this a predictable outcome of a tax code which differentiates so markedly between wage income vs. "investment income"; hence, the term,  the "Buffet effect".

At this point, it makes political sense for the Governor to release the tax returns so that the speculation and discussion can end.  The fact that his returns will almost certainly show he pays these lower rates is not a reflection on him, but rather instead on a skewed tax code system.  Indeed, if handled effectively it could even be turned into an opportunity for the campaign.


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