Did Gov. Mitt Romney do President Barack Obama a big favor last Tuesday by releasing his tax returns hours before Obama presented his State of the Union report to Congress?
Romney's tax returns were the unspoken exhibit A in Obama's speech, which focused on economic fairness in America, especially with our tax laws.
Obama didn't mention Romney's tax returns. He didn't need to. The timing couldn't have been better. Of course, Romney wasn't trying to help Obama, he was responding to pressure from his fellow GOP presidential candidates to release his tax returns.
Almost all of Romney's income for the last several years has been from capital gains or interest on investments. Unlike regular income that most people receive by working at a job, income from capital gains is taxed at a low 15 percent. Romney's returns show an income of $42.6 million over the last two years and a tax bill of $6.2 million, or about 14.5 percent.
As I'm frequently told by financial advisers, there are millions of ways for those who have money to make more money, but few for those who are poor. Indeed, given our nation's current tax code, it is not only easier to make more money when you have money, but you get to keep more of the money you make.
Romney hasn't had a regular job since 2007 when he completed his term as governor of Massachusetts. Nevertheless, he continues to make millions of dollars each year in interest payments from investments made when he worked for Bain Capital, a private equity investment firm that he co-founded. Romney was a millionaire prior to his work with Bain Capital and he became an even richer millionaire because of his work with the firm.
Sen. Carl Levin, of Michigan, is a tax-code expert within the U.S. Senate and has taken the lead in many tax reform efforts. He is pleased that the unfairness of the tax code is finally getting some traction with American voters.
"There's a sea change going on ... the Republicans who ideologically have stood against any revenue are not going to be able to withstand the onslaught of the public outcry against the use of tax loopholes in the code, the tax havens that have been used to avoid paying taxes, the fact that corporations are given deductions for stock options in amounts far larger than they show on their books," Levin said.
There is no evidence that Romney has done anything wrong in either how he made his money or how he pays his taxes. Romney uses the system in place to his benefit, as do the rest of us when it comes to paying our taxes. But the system in place is flawed.
Let's face it, our tax system has numerous entitlements for both the rich and the poor. It is the middle class that pays the disproportionate rate to cover both ends. But I don't mind helping the poor. That makes sense to me. Helping the very rich become even richer, however, doesn't make sense.
At the very least, the tax rate on interest payments, the primary income for millionaires and billionaires, should be taxed as regular income.
No doubt, many rich people reinvest their wealth into businesses that create jobs and stimulate the economy. But their businesses benefit from the roads and infrastructure which support their businesses, not to mention the military that protects them. They should help pay for these benefits without special tax breaks.
Everyone, rich and poor, should contribute something. But the very rich, like Romney, shouldn't pay a 15 percent rate when the teacher down the street is paying a 22 percent rate.
This will be a big campaign issue in 2012, especially with Romney as the GOP presidential nominee. He is, after all, exhibit A.