Taxes and Presidents (and Presidential wannabees)

LA Times has gone deep into the idiot trolling zone today.  Their headline reads, "Obama's federal tax burden drops as book revenues dip."   And just as you'd expect, a bunch of conservative trolls are claiming that President Obama is a hypocrite for not paying his fair share.

These conservative trolls have no clue what they're talking about.  Instead of using either Total Income or Adjusted Gross Income, let's take deductions out of the income, to see what's going on, and use Taxable Income.

• Obamas: 
• 2011 Tax owed / Taxable Income ($496K) = 32.7% tax rate
• 2010 Tax owed / Taxable Income ($1.34M) = 33.9% tax rate
• Romneys: 
• 2011 (estimated) Tax owed / Taxable Income ($15.2M) = 21.2% tax rate
• 2010 Tax owed / Taxable Income ($17.1M) = 17.6% tax rate

This is not what the LA Times wants you to see, apparently, because it divulges the true disparity between the types of income certain millionaires earn, compared to the rest of us.

So for instance, the top tax bracket in the US on ordinary income is 35%.  Now, you'll never see anyone pay the full 35%, because you don't pay 35% on the entirety of your income, right?  For the Obamas filing jointly (and anyone else filing jointly for that matter), only the income above $379,149.99 is taxed at 35%.

(It's an odd twist to the tax system, but the tax bracket is highly regressive for those making above that level. It surely provides an incentive for people barely above that taxable income cutoff level to find whatever deductions they can, to drop below that top tax bracket.)

So look at what the Romneys are paying, in comparison to the Obamas.  The Romneys are EARNING FAR MORE yet they are PAYING FAR LESS in taxes, as a percentage of their Taxable Income.  Remember, this is after deductions to the AGI, so charitable contributions have no effect on this tax rate.

What's going on here?  The millionaire's two favorite tax loopholes: capital gains tax rate and the carried interest rule.

While royalties from Obama's books are taxed as ordinary income, nearly all of Romney's income comes from capital gains and the carried interest from Bain Capital.

People who support the much lower capital gains tax rate (and for a time that rate was zero), insist that this is supporting the job-creators.  So exactly how many employees did Mitt Romney have in 2011 and 2010?

Zero.  Romney has no business; in fact he's classified as a sole proprietor, for tax purposes.  No employees, people.

Frankly, I don't mind the Buffet Rule, but the easier means to resolving this issue, is to make capital gains tax into a progressive tax with different brackets -- 0% for under $20K; 10% for $20K - $50K; 20% for $50K - $250K; 30% for $250K+.

Don't expect Republicans to raise taxes or rejigger the system however...they're clinging to the capital gains as jobs creator rhetoric, no matter what the facts say.