If you are following the Republican Presidential race then you know that Mitt Romney’s competitors have been harping on the fact that Romney had not yet released his income tax information. All that changed this morning when Romney released more than 500 pages of tax documents covering 2010 and 2011. It turns out that Romney’s previous estimate of paying a 15 percent tax rate was pretty close.
According to the paperwork, Mitt Romney and his wife Ann earned a total of $42.7 million in 2010 and 2011. Their total tax bill for that time period was $6.2 million, a little more than 14 percent of their income. If you’re familiar with income tax brackets then you may be wondering how an individual that makes tens of millions of dollars doesn’t come paying the rate at the top of the tax bracket.
The answer is simple – the majority of the Romney’s income comes from investments. Investment income is taxed at a flat 15 percent rate and is not subject to the income tax brackets that govern wage-based income.
Now that Romney has released his income, I’m sure the others in the Republican race for the White House will use it as a basis for more attacks, even though nothing in the report is surprising. His competition knew he made millions and they knew the majority of it came from investments. Romney, himself, admitted this much on the campaign trail.
The bigger question, in my mind, is whether the tax system is setup in a way that is most beneficial to the United States economy and this is where I’d love to hear your views. What do you think of the flat 15 percent tax levied on investment income?