The two issues have collided on Mitt Romney, as his wealth, and taxes he pays on that wealth, has come into question by Republicans and Democrats alike. The consensus, if there is a non-partisan one, is that it is fundamentally unfair for the country's wealthiest individuals to pay a smaller percentage of taxes than most middle class Americans.
In some ways, many of us have Romney to thank for this debate, as we have been complaining about it for years.
The argument has always been that we are anti-capitalists or envious or that we are attacking success-calling it "class warfare." It has never been about any of those things. The issue has always been about fairness. In addition, it is bad for our economic and democratic system to have so much wealth in the hands of so few people. For some reason, people excuse great wealth and inequality, but it drives them absolutely crazy to see someone on welfare.
Romney has finally brought the discussion main street, and across party lines. Unfortunately, we really cannot expect wealthy legislators to create laws that increase their tax burden without significant pressure from the populist. Those in Congress, particularly the Republicans, spend a considerable amount of energy on keeping taxes on the wealthy as low as possible-but this time it is Republican presidential candidates making an issue of Romney's low tax rate.
It seems to be ignored that the very wealthy often earn their money exponentially-and with significant tax advantages. They often earn more in a day than many middle class Americans make in a year. They do not work harder than middle class Americans-they just have more opportunity and advantages in the creation of their wealth.
Edward Kleinbard, a law professor at the University of Southern California, agrees, "The most affluent Americans in recent years have pulled away from the rest of us, and the reason is at least in part that they are able to compound their wealth at very, very low tax rates."
Warren Buffett, who has challenged Congress on the low tax rate for the wealthy, commented on the way Romney makes his money, "He makes his money the same way I make my money. He makes money by moving around big bucks, not by straining his back and going to work cleaning the toilets or whatever it may be. He makes it shoving around money. I make it shoving around money."
And, there is the misconception. While the very rich have obtained their wealth in different ways--some have worked hard for their success, while others simply inherited it--they usually earn a disproportional amount through investment.
Buffet makes a similar point, "If you look at the 400 highest incomes in the United States, they average $220 million. Something like 90 of them are effectively unemployed. They have no earned income, and that number has gone up over the years."
Buffett does not blame Romney but rather the system, "It's the wrong policy to have. Nothing wrong about [Romney] doing that. He will not pay more than the law requires. I don't fault him for that in the least, but I do fault the law that allows him and me, earning enormous sums to pay over all federal taxes at a rate that is about half what the average person in my office pays."
Kleinbard also commented on how the wealthy, like Romney, can use the current system to avoid other taxes. "The returns also demonstrate how, using sophisticated estate planning, Romney has been able to give millions of dollars to his children free of estate and gift taxes, because of a legal structure known as a ‘grantor trust.'"
The numbers are staggering and I have presented them often in this column. It is time to move to a more equitable system of wealth distribution. That is not socialism-I am not advocating the creation of a single class. What I am advocating is that the disparity between the very wealthy, the one percent, and the middle class and poor be reduced a bit. People who do not work hard do not deserve the same success or financial rewards as those that work hard and made the sacrifices of their success.
However, at the same time, the people who are very successful should never pay a smaller percentage of taxes than those who are modestly or less successful. That is just ridiculous.
I have never favored a flat tax, but considering the tax advantages of the wealthy, maybe it is time to tax everyone the same-and that includes all forms of income. This would include employment income, investments, gifts, estates, inheritance-everything. No more loopholes. If someone even finds a dollar in the street, it should be reported as income and taxed.
I'm kidding, sort of.