The Republican Nomination For President: The Race For The Race For The White House

Romney's argument is that his income is his corporation's profits. Those profits get taxed twice: First on the corporate level as a corporate tax of 30%, second on the individual level as an income tax on dividends---currently 15%. That rate is set to rise to 36% in 2013, when the Bush-era tax cuts expire.

In principle, that's a sound argument.

The disclosure shows Romney had an adjusted gross income of $21.6 million in 2010 and an estimated $20.9 million in 2011, largely all of it profits, dividends or interest from investments.

No income was reported from earned wages, as Romney collected millions in capital gains from a myriad of investments, as well as stock dividends and interest payments.

In 2010, Romney and his wife, Ann, paid about $3 million in federal taxes to the IRS on their adjusted gross income, for an effective tax rate of 13.9 percent. And for 2011, Romney estimates he will pay about $3.2 million, for an effective rate of 15.4 percent — significantly lower than rates paid by President Obama and Romney's biggest GOP challenger, Newt Gingrich.

How can this be possible? Very simple.

Romney has taken advantage of tax loopholes that are a direct reflection of the archaic American tax system.

The most glaring loophole in current law that Romney has taken advantage of is the treatment of "carried interest."

Romney and his wife earned $7.4 million in so-called carried interest in 2010 and $5.5 million in 2011, reflecting his share of profits from the private equity firm Bain Capital, which he co-founded in 1984 and retired from in 1999.

That money is currently taxed at the rate normally reserved for long-term capital gains — the 15 percent top capital gains rate rather than the 35 percent top rate for ordinary income earned by people providing personal services.

Managers of private equity funds, such as Bain Capital, don't receive a salary but take a percentage of the fund's profits, which is taxed as capital gains at 15 percent, even though it's a personal service.

In an interview with ABC, Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, noted "most of the income is capital gains, which comes through Bain, all of which is probably carried interest."

The unethical matter is that the carried interest should be taxed at the rates which normally apply to earned income, which tops out at 35 percent. If Romney's carried interest income in the last two years had been taxed at that higher rate, he would have owed about $4.8 million in federal taxes, almost $2.6 million more than under the current tax code.

Romney's investments in foreign entities, some located in Luxembourg, Ireland and the Cayman Islands, are all famous tax havens. Bain Capital, as well as Romney's individual retirement account, have significant holdings in funds based in the Caymans and other low-tax countries to take advantage of these loopholes.

These offshore accounts have provided Romney and Bain Capital with various potential financial benefits, such as higher management fees and greater foreign interest, all at the expense of the U.S. Treasury.

Romney has taken advantage of tax loopholes that are a direct reflection of the archaic American tax system.

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Romney has taken advantage of tax loopholes that are a direct reflection of the archaic American tax system.

Romney and who else? Tens of thousands (if not millions) of us. The 'archaic' tax code doesn't get changed because of the lawmakers to whom it's most beneficial.

Quote:

Romney has taken advantage of tax loopholes that are a direct reflection of the archaic American tax system.

Romney and who else? Tens of thousands (if not millions) of us. The 'archaic' tax code doesn't get changed because of the lawmakers to whom it's most beneficial.

It really makes no sense. If the company I work for pays taxes on its profits (and it does) and then pays me out of what's left

Income to the corporation isn't income to the individual stockholder -- they're not the same people.

As Joe Nation pointed out, when my employer receives income, it pays taxes, and then, out of that income, it pays my salary, on which I have to pay taxes.

Meanwhile those of us earning money for a living get taxed 3 times.
We have to pay FICA tax on our earnings
Then we have to pay income tax on our earnings.
Then we have to pay sales tax on any earnings we spend.

That's 3 taxes!!!

No it doesn't. As I said in my response to JoeNation, your salary comes out of the corporation's before-tax income.

Apples to oranges: corporations also pay FICA taxes, and their owners also pay sales taxes when they spend their dividends.