Romney's 2011 Federal Tax Return: $3.2 Million in Taxes on $20.9 Million in Investment Income for an Effective Tax Rate of 15.4 Percent

The most obvious changes enacted during the Reagan presidency were the dramatic reductions in marginal tax rates. Reagan pushed for, and got from the Democratic Congress, significant reductions in capital gains taxes, which benefited wealthy Americans with large investment income. Capital gains taxes were reduced from an effective maximum rate of 49.875% down to 20%. The minimum 15% tax rate on capital gains was also eliminated under Reagan. The tax rates were not just changed, but the entire tax code surrounding capital gains was changed, shortening the period of time capital had to be held in order to qualify for lower long-term gains tax rates in addition to a number of provisions on the holding and realizing of capital gains. Corporate income taxes were also reduced under Reagan, to their lowest levels since World War II at that time (they are now even lower). - R.G. Price, Since 1980 the Majority of Economic Gains Have Gone to the Wealthiest 1% of the Population, March 30, 2010

Mitt Romney’s Tax Returns Show More Than $42 Million Income over Last Two Years

Romney noted that his income is almost entirely derived through capital gains and noted that under Gingrich's proposal—which would eliminate taxes on capital gains—he would have paid no taxes

January 23, 2012

The Ticket - Mitt Romney paid $6.2 million in federal taxes over the last two years on income generated almost entirely on investments linked back to his days as a founder and partner in Bain Capital [a private equity firm].

According to documents released by his campaign Tuesday, Romney earned $21.7 million in investments in 2010, and he will report another $20.9 million investment income in 2011.

In 2010, Romney paid $3 million in federal taxes but also gave about $3 million to charity—roughly half of that to the Mormon church—which lowered his effective tax rate to roughly 13.9 percent.

According to his 2011 tax return, which hasn't been filed yet, he'll pay $3.2 million in taxes with an effective tax rate of approximately 15.4 percent, according to his campaign. He gave $4 million to charity, including $2.6 million to the Mormon church.

The release comes after weeks of pressure from Romney's rivals for the candidate to release his financial information. After weeks of hedging, Romney finally agreed to release his tax information for the last two years. During Monday's presidential debate in Tampa, he pointedly declined to follow in the footsteps of his father, George Romney, who released 12 years of returns when he sought the presidency in 1964.

Romney said Monday there would be "no surprises" in his filings.

"I pay all the taxes that are legally required and not a dollar more," Romney said during Monday's debate. "I don't think you want someone as the candidate for president who pays more taxes than he owes."

But in the process, he took a shot at rival Newt Gingrich's tax plan. Romney noted that his income is almost entirely derived through capital gains and noted that under Gingrich's proposal—which would eliminate taxes on capital gains—he would have paid no taxes.

See: Private Equity Firms of the Elite Are Snatching Up Banks & Businesses

Inequality in the United States Has Hit a New Level (Excerpt)

October 11, 2011

R.G. Price - People with high incomes receive income from multiple sources, particularly investments which are taxed at a much lower rate than earned income from labor. There is nothing fundamentally wrong with capital gains/investment income, a.k.a. unearned income; the issue, however, comes in its distribution and recognizing that investment income is not representative of value that is created by the recipient; rather, it represents value that was created by other people. Millions, and ultimately billions, of people creating value, significant percentages of which are funneled to a few thousand people, is what makes the wealth of the world's richest people possible.

The vast majority of the income of the wealthiest individuals comes from investment income since this is the only way that such high incomes can be generated. High incomes are generated through investments not due to the contributions of the individual investor, but because investment income is a product of collective wealth generation, whereby value created by millions of people is transferred to single individuals. Everything comes back to capital ownership and control. So all of the highest incomes in America (and generally around the world) are products of massive systems of collective production, in which significant portions of collectively-produced value is funneled to a relatively small number of people.

When we look at a breakdown of income type by income group, it's clear that the wealthiest Americans receive a significantly higher portion of their income from capital than the vast majority of other Americans. When we look at the distribution of income vs. tax receipts by type, however, we see that despite the fact that capital income is by far the primary form of income for the wealthiest Americans, the tax burden falls disproportionately on income from labor — the form of income that is most heavily concentrated among the wealthy was taxed the least, while the form of income that was dominant among working class Americans is taxed the most. This has actually been the case ever since the so-called Reagan Revolution. The tax burden on capital was significantly reduced during Reagan's presidency and has been reduced further since his presidency in following with the trends established during the Reagan Revolution.

More Americans today own some kind of investment, but far fewer stocks are owned directly by individuals, and average individuals who do directly own stocks own such small amount that their voting rights are meaningless. The amount of stock (including mutual funds) owned by most American stock holders is very small, less than $10,000, while the wealthiest Americans own billions of dollars worth of stocks each. The majority of stocks owned by Americans in the bottom 80% of the income population are owned inside of retirement plans like 401(k)s and IRAs.

While about half of Americans own stocks, the majority of those Americans are taxed at the higher wage rates on their investment income because most American's investment income comes only from their retirement plans. Likewise, with the growth of individual retirement accounts since the 1980s, it means that more of the capital that individuals do own is locked up in retirement accounts, and is thus not a source of income for most Americans until after age 65.

What many Americans don't realize is that income from these retirement plans is taxed as though it were wage income; it is not taxed at the lower capital gains tax rates. The idea that around half of Americans "own stocks" is used to support the low capital gains tax rates, when in fact the only people paying those rates are individuals who generate income from investment outside of retirement plans, which is almost exclusively wealthy Americans.

Despite rapid growth in the number of Americans owning stock over the past 30 years, the reality is that there is continued and growing disparity in capital ownership and investment income. Yes, more Americans own at least some form of stock today than ever before, but this hasn't translated into more equal distribution of capital ownership overall or of investment income. In fact, the wealthiest Americans receive a larger share of investment income today than any time in American history, aside from just prior to the market crash of 1929.

The so-called democratization of stock ownership has not lead to democratization of capital control, because despite the fact that more Americans own stocks today than ever before, the vast majority of that stock ownership is through mutual funds which are controlled by institutional investors, who in the end gain greater control and influence via the use of other people's money.

The only people with meaningful investment income prior to retirement are wealthy Americans.