It is less about the 2012 US Presidential Election.
This post is about the politics of envy and about how the US media reports it.
2. Bloomberg is a pro-business website.
Yet it starts off a report on Mitt Romney's 2010 Tax Return with the following (Rubin and Drucker 2012): Republican presidential candidate Mitt Romney’s 2010 tax returns and the 13.9 percent rate he paid highlight how wealthy investors can use the preferential treatment of income classified as capital gains and dividends to minimize payments to the U.S. government.
Is income from capital and investment given "preferential" tax treatment?
It is true that business income is taxed at a lower rate than employment income, but there is nothing unfair about that in principle.
3. I am not familiar with the US tax system, but I suppose that the principle of taxation underlying the US tax system is sufficiently similar to our Canadian system to justify the following comments.
The Bloomberg piece reports (Rubin and Drucker 2012): The Romneys earned $21.6 million in 2010 and paid $3 million in income taxes. More than half of the former Massachusetts governor’s earnings were considered capital gains and dividends, which are taxed at a top rate of 15 percent rather than the 35 percent top rate for ordinary income. His campaign released the returns yesterday.
I suppose what Bloomberg called "ordinary income" is your everyday employment income.
So business income is taxed at a top rate of 15% and employment income is taxed at a top rate of 35% in the US.
Since business income is taxed at a much lower rate than employment income, therefore business income has been given "preferential" tax treatment.
Is it true that business income has been given preferential tax treatment and therefore the 15% top tax rate is unfair?
4. A business is any undertaking in the nature of "an adventure or concern in the nature of trade."
As an adventure, there are risks associated with a business undertaking.
Depending on the nature of the adventure, the risks can be quite substantial.
Making a profit is not a sure thing - it can be very risky.
In contrast, the risks involved in employment income are much less.
One can usually depend on employment income to provide for oneself and one's family.
Recognizing the difference in risks between business and employment income, the two types of income are treated differently from a tax perspective.
One can argue about the top rate for each type of income, but I do not believe there is anything unfair about treating them differently.
5. I have seen a business owner in his fifties crying his heart out before his bankruptcy officer.
It was not a pretty sight.
To those who think business income has been given a "preferential" tax treatment: Let's see you start a business and see how you fair.
Richard Rubin and Jesse Drucker. 2012. Romney’s 13.9% Tax Rate Shows Power of Investment Tax Preference. Bloomberg. January 25.