Taxation ontology

Many have heard by now of Mitt Romney's relatively low (well, very low) tax rate: 13.9 percent on one accounting, 15 percent on another.  This is because his income does not come from work, but rather from dividends and other investments.  These are taxed at a different rate from work. 

I am going to grant that there are arguments for taxing investments differently from work.  Some of these arguments might be good ones, or at least strong ones.  The one Romney offered in is own defense, however, is not one of them. 

Here it goes (via TPM):

Romney’s argument is that even though he pays only 13.9%, he’s really paying something like 45% to 50% because the investment income he lives on comes from corporations. And those corporates also pay taxes. The nominal corporate tax rate is 35%, though of course many pay much lower. But if you add Romney’s rate together with this completely unrelated corporate tax he doesn’t pay, you get 50%, which Romney is now saying is real tax rate. In other words, he’s claiming he pays both taxes.

See the video at the link.  I'm trying to figure out the ontology of this claim.  It seems like Romney is saying that taxation runs with the money, as it were.  So if a corporation (which is, after all, people for Romney) makes profits, those profits are taxed.  That taxation counts for all of the money that then gets paid out in whatever way by that corporation (including the rise in the value of the stock price, etc.).  If the corporation puts the money back into the business, and then later sells the business, the money has already been taxed!  If a corporation pays me to do work for it, then I can claim the money they pay me has already been taxed!  If I buy a product in a store, I can claim that sales tax has already been paid in huge amounts!

I think this only works if corporations are literally people. 

Also, in the video, Romeny included his charitable contributions in his tax burden.  Taxes and charity are significantly different, however.  Taxes are obligations to your fellow citizens.  Charity is up to you.  I don't think he wants us to start thinking of the Mormon Church as a tax-supported entity. 

2 thoughts on “Taxation ontology”

  1. One of the leading arguments for low capital gains taxes is that they encourage investment. So you get professional tax prevaricators pointing to the brief uptick in revenues from capital gains taxes following a significant rate cut and claiming that the uptick "proves" that cutting capital gains taxes both increases tax revenues and spurs investment.
    The truth is, if you're an investor and know what you're doing, you can shift your money from investment to investment without incurring capital gains taxes through "1031 'like kind' exchanges." You're not locked into investments, and you're not taxed when you follow proper procedures to document how you reinvest money derived from the sale of a prior investment. The reason for the uptick is not that people are reinvesting – it's that they're taking advantage of the drop in capital gains taxes to cash out.
    I would have thought, with all of the outright dishonestly that comes from anti-tax groups and their captive economists, Romney could have produced a better whopper than "I really pay 50% of my income in taxes." The fact that Romney can so frequently depart, pretty much completely, from the truth and still be taken seriously as a candidate is a sad indictment of our media and political system. (The worst form of government except for all the others….)

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