It’s about spending, not taxes
By Nolan Finley
Editorial Page Editor, The Detroit News
The left is again aghast at the tax life of Mitt Romney, working up a lather about his revelation that over the past decade his income tax rate has hovered around 13 percent.
That’s brought out the well-worn denunciations of the unfairness of a tax code that permits filthy rich guys like Romney to pay proportionately less than their secretaries.
There’s absolutely no use trying to explain to these crusaders for justice that Romney pays 13 percent because 1.) He reduces his taxable income with millions in charitable donations, and 2.) His income derives primarily from capital gains on investments, which are taxed at a lower rate than income from a paycheck.
Investment income gets a tax break because the government wants people to invest. Investment creates jobs, spurs development, expands the economy and ultimately reaps greater tax revenues.
When George W. Bush lowered the capital gains tax to its current 15 percent rate from 20 percent, revenue from the tax soared over the next three years and helped the nation avoid the severe economic downturns that easily could have followed the 9/11 terrorist attack, the Iraq War or Hurricane Katrina.
As counterintuitive as it seems, each time the capital gains tax is lowered, it produces more tax revenue. And when it’s raised, it fails to generate the additional revenue that is predicted. The 15 percent rate seems to be the sweet spot for producing revenue without slowing growth.
Obama knows this. That’s why he didn’t let the Bush tax cuts expire in 2010 when he had a Democratic Congress. He knew the negative impact on the economy would doom his re-election chances.
But having built his campaign on class warfare, he’s now turning the focus away from spending and deficits, which drove voters to the polls in 2010 to elect Republicans, and toward tax fairness.
Obama has succeeded in shifting the blame for the economic collapse to Wall Street, letting Washington off scot free. He’s funneled the nation’s frustration with stagnation and joblessness into resentment of the mythical 1 percent.
Obama and his fellow Democrats are campaigning on the claim that all that stands between America and prosperity is a tax hike on the wealthy.
We’re more intrigued by how much Romney makes than with how much Obama spends. While we’re obsessed with Romney’s tax returns, there’s no interest in a General Accounting Office report detailing $100 billion in federal government waste and duplication that has been gathering dust for two years while Congress pretends it can’t cut a single dollar.
America doesn’t have a tax problem, or a tax fairness problem. Not when the top 5 percent of earners shoulder 60 percent of the income tax burden and the bottom 49 percent pay 0 percent.
America has a spending problem. The government spends one-third more each year than it takes in. Nothing in Romney’s tax returns will offer insights into how to fix that.
Follow Nolan Finley at detroitnews.com/finley, on Twitter at nolanfinleydn, on Facebook at nolanfinleydetnews
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