Bracketing the question of how we should tax capital income, a subject we discussed last week, I wonder if we’re thinking about Mitt and Ann Romneys’ tax burden in the right way. The following is from Julie Bykowicz and Steven Sloan of Bloomberg:

Republican presidential candidate Mitt Romney donated $7 million to charity in the past two years, more than the $6.2 million the candidate and his wife paid in federal taxes in that period, documents the campaign released show.

Romney and his wife, Ann, who jointly file taxes, gave $1.5 million cash in 2010 and $2.6 million cash in 2011 to the Church of Jesus Christ of Latter-Day Saints, the tax documents show. A former Massachusetts governor whose campaign estimates his fortune at between $190 million and $250 million as co-founder of Boston private-equity firm Bain Capital LLC, Romney is a devout Mormon with deep family ties to the church.

In total, the Romneys donated about 16.4 percent of their adjusted gross income of $42.5 million in the two-year period, according to their 2010 tax returns and an estimate for 2011 taxes. The 2010 return shows $3 million in charitable contributions, and the 2011 estimate shows $4 million.

At first glance, the dollar amount of the Romneys’ charitable giving is “shocking,” Russell James, director of a graduate program in charitable financial planning at Texas Tech University in Lubbock, said in a telephone interview today. “But it’s a different story when you compare it to total wealth. It’s not a shocking amount when you have a quarter- billion dollars in wealth.”

James’s observation strikes me as a bit foolish, given that the Romneys’ have presumably been tithing consistently throughout their adult lives. Had they donated a much smaller share of their income to the LDS Church and to secular charities, they’d presumably have far more private wealth. This is one of the awkward facts about Mitt Romney’s success: given the success of Romney’s peers, like Steven Schwarzman of Blackstone, it is easy to imagine that Romney could have made vastly more money had he decided to “remain in the game” for a longer period of time or had he chosen not to fairly consistently donate more than a tenth of his annual earnings. This is exactly the kind of observation that Romney is congenitally disinclined to make, both because it would come across as obnoxious and because it would be politically toxic. 

So Russell James is missing an important part of the story: had Romney decided, in the vein of Bill Gates and other large-scale philanthropists, to give only small amounts to charity until late in life, he may well have had a much large total wealth endowment on reaching his 50s or his 60s. 

Many have observed that the effective tax rates paid by John Kerry and his wife Teresa Heinz Kerry was somewhat lower than what Mitt Romney and his wife Ann Romney paid over the last two years. But it seems rather more salient to compare how much the Romneys and the Kerrys kept for their respective families, i.e., income after taxes and after charitable contributions. The Heinz family has devoted a great deal of its wealth to charitable foundations, particularly to causes in and around western Pennsylvania. So perhaps the amounts would be comparable. 

There is an obvious objection: after-tax income can be channeled to anything, and charitable giving can be understood as a form of consumption. That, I assume, will remain the reigning interpretation. But another way of thinking about charitable giving is as a reflection of one’s sense of obligation. Some people translate this sense of obligation exclusively through the state: I care about poor people, ergo I think other people should pay higher taxes and I will vote for candidates who might be inclined to raise my taxes. Another approach, however, is to say: I think the government should be subject to spending discipline and also that taxes in some sense represent a diminution of personal freedom, which is why I tend to think of taxes as a necessary evil; yet I also think the fortunate among us should share our good fortune with institutions that are able to take into account considerations of moral character in ways that would actually be inappropriate for the state. 

Can someone out there stack up the candidates according to how much they kept for themselves and their families instead of just how much they paid in taxes as such?