You don’t often see Republican politicians donating money to the federal government. But that’s what Mitt Romney did today. In a statement about Romney’s just-filed 2011 tax return issued by his campaign, Brad Malt, the trustee of Romney’s blind trust, notes that the candidate and his wife paid $1,935,708 in taxes on $13,696,951 in income, for an effective tax rate of 14.1 percent. Malt notes that the Romneys claimed only $2.25 million in charitable deductions, despite having given more than $4 million to charity. By way of explanation, Malt states:
“The Romneys thus limited their deduction of charitable contributions to conform to the Governor’s statement in August, based upon the January estimate of income, that he paid at least 13 percent in income taxes in each of the last 10 years.”
This claim is fanciful in several ways. First, if Romney promised to pay at least 13 percent in taxes, why did he take only enough deductions to bring his rate down to 14.1 percent, when he was eligible for much more?
In fact, Romney never made any commitment to pay a minimum of 13 percent, or more than what he owed in 2011. In August, in response to Senate Majority Leader Harry Reid’s (unsupported) claim that Romney had paid no taxes in previous years, Romney told reporters:
“I did go back and look at my taxes and over the past 10 years. I never paid less than 13 percent. I think the most recent year is 13.6 or something like that. So I paid taxes every single year.”
In context, going back clearly refers to years for which Romney’s returns had already been finished and filed, 2010 and before. “The most recent year” pretty clearly refers to 2010, for which his effective tax rate was in fact 13.9 percent. It would not make sense for it to have referred to 2011, for which Romney’s accountants hadn’t finalized his return, and which wasn’t due until Oct. 15, on extension.
But overpaying his taxes clearly does violate a clear commitment he made in an ABC interview among other places. As he told ABC’s David Muir:
“I don’t pay more than are legally due and frankly if I had paid more than are legally due I don’t think I’d be qualified to become president. I’d think people would want me to follow the law and pay only what the tax code requires.”
By his own standard, then, he is not qualified to become president. But as much as it reveals the absurdities of Mitt Romney, his voluntary overpayment underscores the absurdities of the current tax system. Romney owes so little because of the tax code’s favoritism toward the rich. Whereas the top rate on salary, wages, and tips is 35 percent, the top rate on interest, dividends, and long-term capital gains is only 15 percent. This is economically inefficient, because it encourages businesses and individuals to structure their affairs to take advantage of the differential. It is also instinctively unfair, because it privileges a hedge-fund manager’s carried interest over a factory worker’s wages.
Romney’s charitable contribution to the Treasury concedes this unfairness. The real reason Romney is overpaying is that it simply feels wrong to most people, if not also to him, for someone who earned $13.7 million to be paying less than 13 percent of his income in taxes when working people face a payroll tax of 15.3 percent on their first dollar of income (temporarily reduced to 13.3 percent). By yielding to political criticism and moral pressure about how little he pays, Romney implicitly accepts that under a fairer tax system, people like him would be required to pay more.