Will someone please teach the Left the rudiments of good tax policy? Today’s brouhaha started when Gov. Mitt Romney told reporters that his tax rate is approximately 15 percent. This fact should surprise no one, since he has not drawn a salary in many years and relies on his significant investment income, which is — for sound economic growth reasons — largely taxed at the dividend-income and capital-gains rates. Of course, the Democratic National Committee immediately issued a memo calling the capital-gains tax a “loophole” and attacking Romney for paying his taxes at the rate required by law. The memo also parrots an erroneous Citizens for Tax Justice report that claims a single person earning $60,000 would pay taxes at a 30 percent rate.
The DNC and their friends at the CTJ are wrong on the facts, the policy, and the principle. For starters, the CTJ report counts the employer’s payroll tax as paid by the employee. But the DNC conveniently forgets to include the incidence of taxes — including the corporate-income tax — that would affect Romney’s investment returns. So their comparison is apples-to-oranges, and overstates the hypothetical individual’s tax burden by about 25 percent. The DNC is also cherry-picking a very atypical taxpayer. In fact, as the CBO’s report on effective tax rates makes clear, the median household pays an effective income-tax rate of only 3 percent.
It was sadly inevitable that the Obama campaign and the DNC would demonize Governor Romney for succeeding in the private sector, abiding by the law, and seeking to keep taxes low for all Americans. But just as they have no plan to get the economy going again, they have no plan to improve the tax system. The president repeatedly says he favors tax reform. He has a Treasury filled to the brim with tax economists, lawyers, and accountants. And he has no plan.
Instead of leadership, the American taxpayer is served a vitriolic brew of bitter and divisive attacks pitting one American against another, and a bizarre “Buffett Rule” that would create a new minimum tax eerily similar to the Alternative Minimum Tax that today threatens massive tax increases on the middle class. Distorting our tax system to score political points is no way to run an economy. Good tax policy is part of a good pro-growth policy, which may explain why President Obama’s economic record is what it is.