Thursday, January 19, 2012

Obamaville - Campaign 2012 - A Millionaires Delight?

With just two days until the GOP primary in South Carolina a new player has unexpectedly joined the Republican fracas as the Obama White House has officially broken a promise to stay on the sidelines of the GOP primary politics.

Apparently the Obama advisors just can't resist a chance to influence the vote and for the first time this election the White House Press Secretary, Jay Carney, used the podium of the White House to blast Mitt Romney over his personal income tax comments.

To be fair, Romney was left unprotected and unprepared by his campaign staff on the issues relating to releasing his income tax records.  For a campaign that has maintained a sharp focus on the economy for the long haul and the battle against Obama for the presidency, this was a serious media blunder.

Sensing blood in the wind, the Chicago gang of Obama simply could not resist joining the effort to distort and smear their probable opponent.  In perhaps a blunder on their own part, it was rather odd they left the hatchet job to the White House Press Secretary, paid for by US tax dollars, when all the good Obama mouthpieces are with the campaign and not on the government payroll.

But then they also have President Obama, also on the taxpayer payroll, racing around the country raising hundreds of millions of campaign dollars while acting like a president.  In another related development the Obama campaign is starting to air political campaign commercials in battle ground states even though he is unopposed and the GOP opponent will not be selected officially until the end of August.  By my calendar that is still six months away.

So Romney comments on his probable tax rate of 15%, speakers fees of $300,000 and is ill-prepared to defend his right to be successful, make a lot of money, and be an example for others.

Carney used the White House podium to say Romney is evidence of the need for the millionaire's tax to prevent the rich from paying lower tax rates than middle class Americans.  This is what he had to say.

“The president feels very strongly that everybody needs to pay their fair share and that everybody, therefore, gets a fair shot at the American dream,” the White House press secretary Jay Carney said at his press briefing.

"That includes millionaires who might be paying an effective tax rate of 15 per cent when folks making $50,000 or $75,000 or $100,000 a year are paying much more,” Mr. Carney added.

Though he tried to keep Obama out of the fray by saying his comments were not "specifically" discussed with the President, anyone with any knowledge of the workings of the White House knows nothing is said by the Press Secretary without the approval of the President.

One might consider this politics as usual but there are a couple of potential issues that might benefit Romney as his taxes are released.

First, most of his income came from investments, not salary, just like Obama advisor Warren Buffett and most millionaires.  There is a fixed tax rate of 15% for such income so that is the law.  Romney has supported comprehensive revision of the entire tax code.

While the capital gains tax, which is lower than individual tax rates, favors the wealthy, it was set up to encourage the investment of such funds into building businesses which generates jobs.  If anything, reinvestment in America seems to be a good thing.

Romney is the only presidential candidate who has called for a means test to limit capital gains to only the rich, $200,000 plus income.  The media and political pundits forget that many Americans are subject to this tax for their mutual funds and other investments.

According to U.S. News almost half (42%)  of all Americans use 401(k), IRA, Keogh or other type of retirement account.  A record low 23% of Americans expect to receive pension income, while 20% expect stocks and mutual funds to be a major source of retirement income.  Withdrawals from retirement accounts are taxed as normal income while stocks and mutual fund withdrawals are taxed at the lower capital gains rate.

In addition, when the Romney taxes are released don't be surprised if it shows Romney gave more to his church than anyone else, quite possibly more than all the other candidates and President Obama combined.  His other charitable contributions may also dwarf the other candidates.

Taxes are complex.  There are thousands of pages of US tax code.  It needs an overhaul but attacking classes of taxpayers and calling for the redistribution of wealth is no way to achieve it.  All candidates and both political parties must work together to make the system fair and just.

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