'We Don't Believe Anybody Is Entitled to Success in This Country'

[Glocktogo]

Note to add:

The top 1% is not at all homogenous as far as income and taxes paid.
A good portion of those taxes were paid by people, like some of our doctor friends on the forum here, who are making 300,000 and paying the top rate of 35% because they have earned income.
Other members of the top 1% exploit tax breaks, like Mr. Romney, and don't pay anything like the top rate.
We know from the release of Romney's tax returns he would have paid only 12% last year if he claimed all of his deductions.

What was Romney's actual personal income for last year?

 

[vvvvvvv]

Note to add:

The top 1% is not at all homogenous as far as income and taxes paid.
A good portion of those taxes were paid by people, like some of our doctor friends on the forum here, who are making 300,000 and paying the top rate of 35% because they have earned income.
Other members of the top 1% exploit tax breaks, like Mr. Romney, and don't pay anything like the top rate.
We know from the release of Romney's tax returns he would have paid only 12% last year if he claimed all of his deductions.

But he didn't claim all of his deductions and opted to pay more. Isn't that what Buffett has been asking the rich to do?

How is it "exploiting" tax breaks when you are merely leveraging what's available to you? Why not just get rid of tax deductions, credits, and subsidies altogether?

 

[Glocktogo]

But he didn't claim all of his deductions and opted to pay more. Isn't that what Buffett has been asking the rich to do?

How is it "exploiting" tax breaks when you are merely leveraging what's available to you? Why not just get rid of tax deductions, credits, and subsidies altogether?

Because "exploit" is such a wonderful word to describe what EVERY tax payer does to the best of their ability.

 

[Hobbes]

But he didn't claim all of his deductions and opted to pay more. Isn't that what Buffett has been asking the rich to do?

He didn't claim all his deduction YET. He has 3 more years to file an amended claim and get a big check back from the government.
The reason he didn't claim those deduction is because it would be embarrassing to admit he only paid 12% when he previously claimed that he has never paid less than 13%.

How is it "exploiting" tax breaks when you are merely leveraging what's available to you? Why not just get rid of tax deductions, credits, and subsidies altogether?

He files his income as "carried interest" which qualifies as capital gains. It's actually muddier than that and some tax lawyers say it is illegal.
When he started Bain capital he didn't put any capital in the company. Others did and he helped manage that capital.
How can you have capital gains when you didn't put any capital in to begin with?
What he did put into Bain is work, lots of work but still it was labor.
And labor is supposed to be taxed as ordinary income, NOT capital gains.

That's how he and others exploit the tax system.

 

[Glocktogo]

He didn't claim all his deduction YET. He has 3 more years to file an amended claim and get a big check back from the government.
The reason he didn't claim those deduction is because it would be embarrassing to admit he only paid 12% when he previously claimed that he has never paid less than 13%.


He files his income as "carried interest" which qualifies as capital gains. It's actually muddier than that and some tax lawyers say it is illegal.
When he started Bain capital he didn't put any capital in the company. Others did and he helped manage that capital.
How can you have capital gains when you didn't put any capital in to begin with?
What he did put into Bain is work, lots of work but still it was labor.
And labor is supposed to be taxed as ordinary income, NOT capital gains.

That's how he and others exploit the tax system.

Again I ask, what was his actual personal income for 2012?

 

[Hobbes]

Again I ask, what was his actual personal income for 2012?

2012 isn't over yet. You mean 2011?
http://www.nytimes.com/interactive/2012/01/24/us/politics/romney-2011-returns.html

 

[Hobbes]

Here is a better explanation than I can explain it:

Okay, now for those who, inexplicably, would rather spend their free time reading Fifty Shades of Grey than Tax Notes columnist Lee A. Sheppard, some background is needed. Carried interest is the 20% or so of profits that managers of private equity and hedge funds demand from their investors. In effect, it’s pay for their services, contingent on their results–kind of like a CEO’s bonus tied to a company’s results. But instead of being taxed like a bonus, at top ordinary income tax rates of 35%, plus Medicare payroll taxes, carried interest gets taxed—though “the indulgence of the IRS’’ as Sheppard puts it—as long term capital gains, at a current top rate of just 15%. (To oversimplify: the carried interest share, when awarded, supposedly can’t be valued, and so the IRS lets the money managers elect to value it at zero and then have their future income taxed as if they were partners who had risked their own capital in the fund.)

After Romney left Bain in 1999 to run the Salt Lake City Olympics, he negotiated a deal that gave him carried interest in Bain funds set up for a decade after his departure–and hence a stream of retirement income taxed at low rates. By contrast, executives of big public companies get taxed on their cushy deferred compensation at the 35% rate.

Today, the Wall Street Journal expands on Graetz’s observation, posting materials here from a 2008 legal continuing education presentation by that partner from Romney’s trustee’s law firm, Ropes & Gray. In his presentation, the partner noted that based on the income tax valuation of zero the IRS had allowed for carried interest, in the 1990s and early 2000s, some lawyers were advising clients they could give carried interest away and claim it had zero value for gift tax purposes too. (Since then, practitioners have decided, based on various cases and proposed rules, that they must give gifts of carried interests a value greater than zero.) The Romney campaign wouldn’t tell the Journal if Romney gifted any of his carried-interest rights to the family trust, although there are indications that might well be the case.

Oh, yeah. And then there are the 950 pages of Bain-related documents Gawker posted on the web on Thursday. No, there were no great revelations in those documents. But as The New York Times reports here, they seem to indicate that Bain partners converted $1 billion of straight management fees (which are not contingent on profit, and are taxable at 35%) into additional lower taxed carried interest. Victor Fleischer, a University of Colorado law prof who has written extensively (and critically) on the carried interest break, argues here that such conversion isn’t legal—although there’s no evidence the IRS has challenged it.

You get the idea: It’s the carried interest, stupid. Carried interest is one sweet tax break–a loophole created (like many others benefiting the richest) not by a conscious decision of Congress, but by a combination of smart and aggressive private lawyers and outgunned and gun-shy IRS officials. It is, in other words, a good example of what some folks think is wrong with the way our tax code currently operates. For tax reformers, Mitt Romney’s income and gift tax returns could provide a unique teachable moment.

Of course, there’s nothing stopping the politicians (even without seeing Romney’s returns) from closing the carried interest loophole —nothing, that is, other than fear of angering billionaire donors. Most famously, billionaire Stephen Schwarzman, co-founder and CEO of The Blackstone Group, compared President Obama’s and fellow Democrats’ attempts to tax carried interest at 35% to Hitler’s invasion of Poland. (He later apologized for that comment.)

So what’s Romney’s position on the taxation of carried interest? As Fortune notes here, during the last presidential campaign, Romney opposed ending the carried interest break. This time around, he has yet to say.

http://www.forbes.com/sites/janetnovack/2012/08/24/romneys-taxes-its-the-carried-interest-stupid/

 

[Dave70968]

If no one is entitled to success then why is there a lottery and casinos, It's a gamble and someone is entitled to win it.

Do you actually know what "gamble" and "entitled" mean? Because they're damned nearly opposites.

 

[DPI]

Note to add:
Other members of the top 1% exploit tax breaks, like Mr. Romney, and don't pay anything like the top rate.
We know from the release of Romney's tax returns he would have paid only 12% last year if he claimed all of his deductions.

Mitt Romney paid $1.9 million in taxes on an income of $13.7 million — and gave $4 million to charity. 14.1% to taxes, 29.2% to charity.

Romney's effective tax rate was not primarily due to deductions, although he gave 4 million to charity, it was due to his income from investment income. Capital gains are taxed at 15% no matter how you spin it, it is legal.

 

[Hobbes]

Mitt Romney paid $1.9 million in taxes on an income of $13.7 million - and gave $4 million to charity. 14.1% to taxes, 29.2% to charity.

Romney's effective tax rate was not primarily due to deductions, although he gave 4 million to charity, it was due to his income from investment income. Capital gains are taxed at 15% no matter how you spin it, it is legal.

I'll reiterate.

Romney invested no capital in Bain, only labor.
How can you reap a capital gain when you invested no capital?