Many people seem to think it is important that we all pay federal taxes. Matthew O’Brien calculates the federal taxes he would pay if the Ryan budget becomes law.
Under Paul Ryan’s plan, Mitt Romney wouldn’t pay any taxes for the next ten years — or any of the years after that. Now, do I know that that’s true. Yes, I’m certain.
Well, maybe not quite nothing. In 2010 — the only year we have seen a full return from him — Romney would have paid an effective tax rate of around 0.82 percent under the Ryan plan, rather than the 13.9 percent he actually did. How would someone with more than $21 million in taxable income pay so little? Well, the vast majority of Romney’s income came from capital gains, interest, and dividends. And Ryan wants to eliminate all taxes on capital gains, interest and dividends.
Romney, of course, criticized this idea when Newt Gingrich proposed it back in January by pointing out that zeroing out taxes on savings and investment would mean zeroing out his own taxes.
Almost. Romney did earn $593,996 in author and speaking fees in 2010 that would still be taxed under the Ryan plan. Just not much. Ryan would cut the top marginal tax rate from 35 to 25 percent and get rid of the Alternative Minimum Tax — saving Romney another $292,389 or so on his 2010 tax bill. Now, Romney would still owe self-employment taxes on his author and speaking fees, but that only amounts to $29,151. Add it all up, and Romney would have paid $177,650 out of a taxable income of $21,661,344, for a cool effective rate of 0.82 percent.
Do these numbers or is O’Brien just engaging in class warfare? They matter a lot. The Wall Street Journal reminds us how little the bottom 40% of our population earns, even when you add in government benefits.
In 2007, the bottom 40% received 14.9% of the income (including the value of government benefits) and paid 5.9% of all federal taxes.
The top 1% during that same year earned 23.5% of income. The top 0.1% earn about half of that,about 12%, or roughly the same as the bottom 40%. If that top 0.1% no longer pays taxes, or sees a drastic drop in their rates, it becomes mathematically necessary to increase taxes on everyone else. The top 0.1% pay about 17% of all federal taxes. That will be a lot of revenue to lose at a time when people are concerned about our debt.
Beyond that, I have to wonder why those who have publicly stated they think everyone should pay federal taxes would support a plan that leaves this particular group exempt from paying them.