Romney and income taxes | Eastern North Carolina Now

    Publisher's Note: Jim Bispo's weekly column appears in the Beaufort Observer.

    Well, Mitt Romney has finally released his 2011 tax return, all 379 pages of it. Yes, 379 pages!! And now we are going to start hearing about all the "bad" things he did and "good" things he didn't do in his return.

    But wait!! Did you ever hear the old adage about those who live in glass houses shouldn't throw stones?? It certainly seems applicable to this situation.

    Just think about it for a minute or two. Think about it in terms of your own tax return. You start out by showing all the money you earned whether it came from working for an employer or from interest on your savings account at the bank or wherever. If you are self employed, you prepare a Schedule C which is supposed to document all your self employment income. Take a look at lines 7 through 21 on your 1040 for a list. All these income streams are totaled up and represent your total income.

    You then make some "adjustments" to your income (potentially 13 in all). All these adjustments are totaled up and then subtracted from your "total income" to arrive at your "adjusted gross income" (line 37 - lower right hand corner of your Form 1040).

    You then go to the next page where you then subtract either the "standard deduction" or your "itemized deductions" (from Schedule A). You would normally take the standard deduction unless your itemized deductions totaled up to more than the allowable standard deduction for your filing status - in which case you would normally take the itemized deduction amount.

    You then subtract from that number $3,700 for each exemption you claim (that would typically be one for you, one for your wife - if you are filing Married filing jointly - and one for each child you are entitled to claim). You, your wife and two kids equals $14,800 that you are allowed to subtract from your income. If it's just you and your wife, it's $7,400 (not taking into consideration age or blindness)..

    The result is your taxable income. That is the amount of your income that is subject to income tax. It is considerably less than your total income. You have followed the IRS Code and you have been able to pay taxes on less income than you received.

    You either go to the "lookup tables" to determine your tax or you use the IRS provided formulas to compute your tax. But you aren't done yet. (And this is where it starts getting good.)

    After calculating the amount of your tax, you start reducing that amount by the amount of allowable credits. To name a few: Child tax credit, alternate energy credit, education credit. The list goes on. Remember, a credit is a dollar for dollar reduction in the amount of tax you pay.

    So what's the point of all of the foregoing discussion?? The point is that there are only two significant differences between Mitt Romney's tax return and your return, my return and just about everybody else's return..

    They are the amount of income shown on the return and the amount of taxes owed.

    His accountants did the same thing that we all do. That is take advantage of every legal thing they can that will serve to reduce the amount of taxes that must be paid. Is the tax code arcane?? You bet it is, but it wasn't Mitt Romney or you or me who made it that way. As a matter of fact, Romney's accountants didn't even take all the deductions to which he was entitled. Reportedly they did not take the full allowable deduction for "contributions" nor was I able to find a deduction for "tax preparation". The bill for tax preparation had to be fairly healthy when you consider the big dollar accounting firm (Price, Waterhouse, Coopers) which prepared the return and it's 379 page length. He likely paid at least $250K more in taxes than he need have.

    If you don't like the result, change the tax law. According to an article in the Channel 7 web site, "Stephanie Cutter, deputy campaign manager for President Barack Obama, said the release of Romney's 2011 tax returns "confirms what we already knew that people like Mitt Romney pay a lower tax rate than many middle class families because of a set of complex loopholes and tax shelters only available to those at the top." (Emphasis added.) She is not simply trying to mislead us. What she says is an outright lie. (Every arcane thing his accountants took advantage of is available to every American taxpayer. Period!!) Is taking advantage of everything that we can in order to reduce our taxes OK for us but not OK for him?? I don't think so; no matter how large his income; and no matter what Ms. Cutter says. And, by the way, Ms Cutter, why don't you tell us how many of those folks who paid a higher tax rate than did Mr. Romney paid more than the $1.9M+ which he paid?? Hmmm...

    Warren Buffett keeps telling us that the rich should be paying more taxes. Well. it would seem that Mr. Romney has taken those sometimes shrill protestations to heart and paid at least $250K more than he would have, had he taken his full deduction for his charitable contributions. Well, Mr. Buffett, Mr Harry Reid, Mr Prez, Mr Biden, Ms. Cutter, how much did you overpay?? My guess is that combined, it wouldn't have been enough to even buy a cup of coffee. And Mr. Keep Your Tax Returns Secret Reid, what did I tell you about glass houses and throwing stones?? When are we going to see your tax returns?? And how about you, Ms. Cutter??

    We are going to hear the Warren Buffett crowd complaining that he (Romney) only paid an effective rate of 14.1% (this figure from the Washington Post) which is likely a lower percentage than some of his employees pay. A single person with taxable income of over $8,500 pays a marginal rate of 15% on the amount over $8,500. A married couple filing joint with a taxable income of over $17,000 pays a marginal rate of 15% on the amount over $17,000. The fact that Romney's income contains a lot of capital gains (which are typically taxed at the lower capital gain rate) also helps to hold down his "effective tax rate. When you and I have capital gains, we also pay the lower capital gains tax rate for that income.

    The marginal tax rate" is the tax rate that you pay on the highest increment of your income (the last dollar you made). The effective tax rate is the amount of tax you actually paid divided by your adjusted gross income. Typically, someone with an Adjusted Gross Income in the $50 - 60K range would likely be in the 15% marginal tax bracket with an effective rate in the 7 - 8% range.

    Anybody that buys into the notion the Mr. Buffett (and the Anointed One and his henchmen) is (are) peddling is being grossly misled. Anybody who tries to use the "Buffett argument" against you is trying to mislead you. (think Stephanie Cutter) They are using "marginal tax rate" and "effective tax rate" interchangeably. It is true that so called Capital Gains are taxed at a lower rate than ordinary income, but that nas nothing to do with the amount of your income. Marginal tax rates and effective tax rates are not interchangeable!! They are two entirely different things. Trying to make a point by using them interchangeably is clearly disingenuous. That's all there is to it. Of course that won't stop the two Davids ( A.& P.) , the Anointed One, Stephanie Cutter, Harry Reid (and everyone else who gets the Dem's "talking points" paper) from trying to mislead us about this subject to the extent that they can..

The long and short of it is that if you want to change the way taxes are calculated and paid, congress needs to change the tax laws. Or maybe the Anointed One could save Congress the trouble and solve the whole problem with an Executive Order... Maybe while they are in recess...(Well, it seems to have worked for NLRB appointments..)

D'ya Think??
We agree with Hood Richardson. The best thing to do at this point is dump the building for whatever can be salvaged from it. It does not make sense to let it sit and wait for its value to appreciate. That may never happen. The taxpayers got stuck by the Gang of Five but it's better to cut the losses and get out of it if we can. Hood, we think, hit the nail on the head when he said: "this whole thing just goes to show the folly of government trying to get into commercial business. We should get out of the real estate speculation business and stay out of it. Let's hope they've learned their lesson."

We would simply ask Jay McRoy and Al Klemm, the two commissioners who sat on the EDC when this thing was decided, "How do you propose to recompense the taxpayers of Beaufort County for this blunder you orchestrated?"