Breaking News: Romney Paid Capital Gains Taxes in 2010

[PapaG]

Q

I fail to see how that fact is in any way germane to Mitt Romney's tax records being released.

His tax records have been released. You're correct on that one. Obama hasn't released 10 years of his tax records, fwiw. For some reason, that only applies to Romney. Must be a Rezko/tax deal?

 

[Denny Crane]

False.

His income was taxed when it was earned as income. He invested the money post-tax, and whether he made money or not, it is taxed at the same rate.

It's secondary taxation. Learn the game, then post. I'll add that a part of the Dem platform is to tax 401k money for the common folk, since currently, that money isn't taxed for income prior to being placed into a 401k account.

As usual, you don't know what you're talking about, Denny.

What part of the actual capital gain did Romney pay tax on twice? He's not taxed twice on his BASIS.

 

[PapaG]

What part of the actual capital gain did Romney pay tax on twice? He's not taxed twice on his BASIS.

My point is that the money invested has already been taxed via the income tax. It makes sense to have a flat rate on secondary income made off of already taxed money, which is why it's called the capital gains tax.

Now, one can argue about how he invested wisely to get fantastic returns, but that's a completely different issue.

Are you saying you're in favor of a progressive tax rate for investments, as in the more of a % you make on investments you make, the higher the tax rate? If so, I understand that argument, if not necessarily agreeing with it.

 

[Denny Crane]

http://www.irs.gov/taxtopics/tc409.html

When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for is a capital gain or a capital loss. Generally an asset's basis is its cost, ...

 

[PapaG]

http://www.irs.gov/taxtopics/tc409.html

When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for is a capital gain or a capital loss. Generally an asset's basis is its cost, ...

Yeah, you just proved my point. Thanks. There is a flat rate for capital gains made on invested money. That's my entire point. Thanks for agreeing with me.

 

[PapaG]

You're also taxed on capital gains for assets not sold, by the way. I'm not sure anybody here actually has had to pay those taxes, though. Making money on paper isn't "free", regardless of if you sell those assets.

 

[Denny Crane]

My point is that the money invested has already been taxed via the income tax. It makes sense to have a flat rate on secondary income made off of already taxed money, which is why it's called the capital gains tax.

Now, one can argue about how he invested wisely to get fantastic returns, but that's a completely different issue.

Are you saying you're in favor of a progressive tax rate for investments, as in the more of a % you make on investments you make, the higher the tax rate? If so, I understand that argument, if not necessarily agreeing with it.

Those are very different questions than whether he was taxed twice.

Some people would look at his having enough money to have big capital gains income and to only pay 15% while most not-so-rich people pay 30% or even 50% in tax as unfair.

I look at having that kind of money as a responsibility, and the 15% long term capital gains tax rate encourages investment and long-term investment. It's part of the responsibility to invest.

It gets quite muddled, though.

A guy can buy 100 shares of stock at $50 and see the stock fall to $10, he buys another 100 shares at $10 and it goes to $100. He decides to sell 1/2 the stock so he sells the shares he bought at $50 to minimize his capital gain.

Or the guy could have sold his shares at $10 and taken a $40 loss and next year used that loss against $40 in gains to effectively pay no tax at all for that tax year.

So it's quite possible that Romney had huge losses in 2008 and paid no taxes on his capital gains for the 2009 tax year. In fact, it is quite likely he had those losses, if he sold any stock at all. Capital losses can be used in any subsequent year against capital gains.

 

[PapaG]

Those are very different questions than whether he was taxed twice.

Some people would look at his having enough money to have big capital gains income and to only pay 15% while most not-so-rich people pay 30% or even 50% in tax as unfair.

I look at having that kind of money as a responsibility, and the 15% long term capital gains tax rate encourages investment and long-term investment. It's part of the responsibility to invest.

It gets quite muddled, though.

A guy can buy 100 shares of stock at $50 and see the stock fall to $10, he buys another 100 shares at $10 and it goes to $100. He decides to sell 1/2 the stock so he sells the shares he bought at $50 to minimize his capital gain.

Or the guy could have sold his shares at $10 and taken a $40 loss and next year used that loss against $40 in gains to effectively pay no tax at all for that tax year.

So it's quite possible that Romney had huge losses in 2008 and paid no taxes on his capital gains for the 2009 tax year. In fact, it is quite likely he had those losses, if he sold any stock at all. Capital losses can be used in any subsequent year against capital gains.

It's actually a very simple taxation, at least in terms of what is being taxed, and if the original investment had been income taxed, and why.

Not sure why you're continuing to dig a hole, other than that's kind of what you do when you're shown to be clueless.

 

[jlprk]

When you sell an asset (house, business, or investment), you pay tax on its gain in value while you owned it, but not on its basis (the amount you spent on it). How is this double taxation?

 

[mobes23]

His income was taxed when it was earned as income. [stuff deleted] As usual, you don't know what you're talking about, Denny.

It's really not that hard to be respectful, even if you disagree with someone. Then again, it's a pattern that's been around forever and it sure is tiresome. All I can say is that Denny's patience is amazing.

First off, he has essentially NEVER paid tax at the rates most of us pay. He's smack dab in the middle of the hedge fund loophole, which means the vast majority of the money he's made has been taxed at the long term capital gains rate. Rather than receiving salary that would be taxed at usual tax rates, the hedge fund crowd gets the bulk of their compensation in the form of capital gains...usually long term capital gains...so that their effective tax rate is MUCH lower than someone receiving a paycheck.

Usually, when people talk about double tax, they are talking about an investor in a profitable company. The profitable company is successful and pays tax on its profits (tax #1). Profitable company then distributes money to investor in the form of dividend and investor pay tax on the dividend (tax #2). In other words, the profits generated by company get taxed twice along the way. That usually what is meant by double tax, as far as I know.

In Romney's case, where virtually all of his income is LTCG, he only pays tax when shares are sold at a profit and he's taxed only on the profit. If he turns around and invests those profits in another company, he'd pay tax (or claim loss) when he sells those shares. The cost basis would be adjusted and he is not re-taxed on profits he made from the previous investment.

FWIW, I 've got to think Romney probably paid tax even in poor investment years. I think there are probably other things he'd like to keep quiet...and that's why he's not disclosed his tax returns and why the dems are so fired up to make it happen.

Not sure if it's been mentioned before, but apparently it's been disclosed that the Romneys claimed tax deductions on Ann Romney's dressage/"horse ballet" expenses of approx. $70k. That's exactly the sort of thing Romney would've like to keep quiet and I'm guessing there are similar expenses that haven't been disclosed yet.

 

[PapaG]

It's really not that hard to be respectful, even if you disagree with someone. Then again, it's a pattern that's been around forever and it sure is tiresome. All I can say is that Denny's patience is amazing.

First off, he has essentially NEVER paid tax at the rates most of us pay. He's smack dab in the middle of the hedge fund loophole, which means the vast majority of the money he's made has been taxed at the long term capital gains rate. Rather than receiving salary that would be taxed at usual tax rates, the hedge fund crowd gets the bulk of their compensation in the form of capital gains...usually long term capital gains...so that their effective tax rate is MUCH lower than someone receiving a paycheck.

Usually, when people talk about double tax, they are talking about an investor in a profitable company. The profitable company is successful and pays tax on its profits (tax #1). Profitable company then distributes money to investor in the form of dividend and investor pay tax on the dividend (tax #2). In other words, the profits generated by company get taxed twice along the way. That usually what is meant by double tax, as far as I know.

In Romney's case, where virtually all of his income is LTCG, he only pays tax when shares are sold at a profit and he's taxed only on the profit. If he turns around and invests those profits in another company, he'd pay tax (or claim loss) when he sells those shares. The cost basis would be adjusted and he is not re-taxed on profits he made from the previous investment.

FWIW, I 've got to think Romney probably paid tax even in poor investment years. I think there are probably other things he'd like to keep quiet...and that's why he's not disclosed his tax returns and why the dems are so fired up to make it happen.

Not sure if it's been mentioned before, but apparently it's been disclosed that the Romneys claimed tax deductions on Ann Romney's dressage/"horse ballet" expenses of approx. $70k. That's exactly the sort of thing Romney would've like to keep quiet and I'm guessing there are similar expenses that haven't been disclosed yet.

Bullshit. No need to read the rest of it.

 

[mobes23]

Bullshit. No need to read the rest of it.

Of course, why would you want to read about a truth that you don't like?

It's much easier to stick to fantasy world, which would be fine if you didn't need to attack other people when reality and your fantasyland come into conflict.

 

[Sedatedfork]

Money earned on investments IS income. It is not taxed twice. In fact it probably is taxed less than if it was spent.

Example 1: Mitt Romney pays a $500 tax on $1500 speaking fee. He then uses that residual $1000 to buy an investment. The investment increases in value, now it is worth $2000. Mitt sells the investment and pays another $150 in tax.

Example 2: Mitt Romney pays a $500 tax on $1500 speaking fee. He then buys a guitar with his $1000 from PapaG. PapaG made the guitar from raw materials that cost him $150. Let's pretend Papa G pays a 1/3 income tax ($283) tax on the $850 he earns from Mitt. But why does PapaG have to pay the tax, since the IRS already collected $500 from the $1500? :MARIS61:

 

[PapaG]

Of course, why would you want to read about a truth that you don't like?

It's much easier to stick to fantasy world, which would be fine if you didn't need to attack other people when reality and your fantasyland come into conflict.

You're saying that Romney has NEVER paid normal tax rates. That is a total fabrication, and is almost as bad as Harry Reid's new delusion that Romney hasn't paid taxes in 10 years.

 

[PapaG]

Money earned on investments IS income. It is not taxed twice. In fact it probably is taxed less than if it was spent.

Example 1: Mitt Romney pays a $500 tax on $1500 speaking fee. He then uses that residual $1000 to buy an investment. The investment increases in value, now it is worth $2000. Mitt sells the investment and pays another $150 in tax.

Example 2: Mitt Romney pays a $500 tax on $1500 speaking fee. He then buys a guitar with his $1000 from PapaG. PapaG made the guitar from raw materials that cost him $150. Let's pretend Papa G pays a 1/3 income tax ($283) tax on the $850 he earns from Mitt. But why does PapaG have to pay the tax, since the IRS already collected $500 from the $1500? :MARIS61:

Yes, that's the tax code on investments. We've already been over this.

What's your point? That Romney paid the appropriate taxes on his 2010 income? Big whoop.

 

[Sedatedfork]

To summarize, Romney paid the tax rate that he was supposed to pay on income that was taxed once as income, and now twice in capital gains. This fact is now a misleading national ad the Obama is running.

Romney should actually run an ad illustrating how this is double taxation on the middle class. We're already taxed, and yet if we invest, we're taxed on earnings for investing wisely.

Sound familiar?

 

[mobes23]

Drama queen much?

I'm saying that he likely has almost exclusively paid taxes at tax rates for long term capital gains. It's likely the truth and I don't think that point is at all controversial. The hedge fund tax loophole has been talked about a fair amount. This NPR link is to an old story, but it explains it pretty well:

http://www.npr.org/templates/story/story.php?storyId=127728787

Obviously, we can't know his effective tax rate unless he releases his tax returns, but given his line of business it's pretty much a lock.

Edit: adding quote from NPR article:

"Here's how it works at a hedge fund: An investment manager launches a fund and gets a lot of rich people or institutions to put up most of the money. The manager is paid, in large measure, by getting something like 20 percent of all the profits the fund makes. If it earns $100 million, the investors pay the manager $20 million. But instead of paying the top income tax rate of 35 percent on that amount, the manager pays just 15 percent. That's normally the tax rate reserved for capital gains income like the profits made on the sale of stocks or real estate."

 

[MARIS61]

I ducked the question in no uncertain terms.

FIFY

 

[Denny Crane]

Drama queen much?

I'm saying that he likely has almost exclusively paid taxes at tax rates for long term capital gains. It's likely the truth and I don't think that point is at all controversial. The hedge fund tax loophole has been talked about a fair amount. This NPR link is to an old story, but it explains it pretty well:

http://www.npr.org/templates/story/story.php?storyId=127728787

Obviously, we can't know his effective tax rate unless he releases his tax returns, but given his line of business it's pretty much a lock.

Edit: adding quote from NPR article:

"Here's how it works at a hedge fund: An investment manager launches a fund and gets a lot of rich people or institutions to put up most of the money. The manager is paid, in large measure, by getting something like 20 percent of all the profits the fund makes. If it earns $100 million, the investors pay the manager $20 million. But instead of paying the top income tax rate of 35 percent on that amount, the manager pays just 15 percent. That's normally the tax rate reserved for capital gains income like the profits made on the sale of stocks or real estate."

It's clear to me you've said "almost exclusively" twice now.

I would think that when Romney was manager of Bain, he was paid a nice hefty salary and paid big taxes on it. He likely paid taxes on his governor's salary, too. He may have a number of 1099 type incomes, such as speaking engagement fees.

A couple of good links:

http://www.forbes.com/sites/peterjr...ns-would-be-as-shocking-as-gambling-at-ricks/

And

http://taxprof.typepad.com/taxprof_blog/2012/06/tobin-the-.html

Ann Romney’s love of horses and Steven Colbert’s infatuation with Rafalca, one of her dressage horses, have created a buzz about horses, money, and taxes. Romney owns a one-third interest in Rafalca, and Rafalca will be competing, with her rider, Jan Ebeling, in the Olympic dressage event. In the most recent uproar, the Romneys are criticized for deducting $77,731 for the Romney’s share of Rafalca’s expenses. But here is the catch: Because of anti-abuse provisions contained in the Tax Code the Romney’s only actually deducted $49 on their return. Assuming the Romney’s are in the 35% tax bracket, the benefit to the Romneys was about $17. Not much worth working yourself into a lather about.


(But jlprk and maris61, feel free to work yourselves into a lather).

 

[PtldPlatypus]

So are we complaining about Romney paying less in taxes than your average work-a-day stiff because the tax code allows for it? Are we blaming him for following the rules? If we have a problem with the capital gains tax rate, why is that Romney's fault?

 

[tlongII]

So are we complaining about Romney paying less in taxes than your average work-a-day stiff because the tax code allows for it? Are we blaming him for following the rules? If we have a problem with the capital gains tax rate, why is that Romney's fault?

Bang! Exactly.

 

[Sedatedfork]

So are we complaining about Romney paying less in taxes than your average work-a-day stiff because the tax code allows for it? Are we blaming him for following the rules? If we have a problem with the capital gains tax rate, why is that Romney's fault?

Yeah, I don't think that he did anything wrong (unless these tax returns show he was expensing stuff for Bain when he supposedly wasn't working there or that he wasn't paying taxes on foreign investments after the laws changed on that). Romney is in a Catch22. If he has nothing to hide, he should just produce the returns. Otherwhise it will never go away. If he is just ashamed of his wealth or the % tax he paid, it's better to produce it now and it will blow over before the election. If he has something to hide, then I guess it's better to not produce the records.

 

[chris_in_pdx]

Because Romney and his ilk have rigged the tax code to benefit them. Yes, that's class warfare. And people like us are losing.

 

[Denny Crane]

Because Romney and his ilk have rigged the tax code to benefit them. Yes, that's class warfare. And people like us are losing.

Whoops. There's provisions in the tax code to allow people like us to sell a home at a profit and use the profit to buy a new one - without being taxed on the gain.

People like us are winning.

 

[BLAZINGGIANTS]

Sort of a moot point when he parks the vast bulk of his ridiculous fortune in foreign countries to avoid paying ANY taxes on them.
There's the letter of the law.

And then there's the spirit of the law, loyalty to country, common sense of what's fair, gratitude to those who toiled to make you rich...

Romney probably follows the letter of law.

Income made in other countries is taxed in the US. Now, you can claim a credit on your US return for foreign taxes paid. But unless he paid enough foreign tax, he had to pay US taxes on his foreign income. Either way, he would have had to pay tax (or break the law).

 

[BLAZINGGIANTS]

Yeah, I don't think that he did anything wrong (unless these tax returns show he was expensing stuff for Bain when he supposedly wasn't working there or that he wasn't paying taxes on foreign investments after the laws changed on that). Romney is in a Catch22. If he has nothing to hide, he should just produce the returns. Otherwhise it will never go away. If he is just ashamed of his wealth or the % tax he paid, it's better to produce it now and it will blow over before the election. If he has something to hide, then I guess it's better to not produce the records.

Agreed. Kinda like the whole Obama birth certificate thing, though.

It's funny that politicians spend all their time digging at each other, looking for their mistakes and opening scabs, rather than talking about how they can better serve the American Public.

 

[BLAZINGGIANTS]

Whoops. There's provisions in the tax code to allow people like us to sell a home at a profit and use the profit to buy a new one - without being taxed on the gain.

People like us are winning.

Up to $500K of gain (or I think $250K if you're not married). So this part of the code definitely benefits the majority, rather than the 1%. But there's a lot in the code that benefits the wealthy.

 

[PtldPlatypus]

Because Romney and his ilk have rigged the tax code to benefit them. Yes, that's class warfare. And people like us are losing.

So we're blaming Romney because of "his ilk"? Or are we saying that Romney was involved in the development of the tax code that taxes him at 15%? Otherwise, aren't you basically blaming him for being rich?

 

[mobes23]

It's clear to me you've said "almost exclusively" twice now.

I would think that when Romney was manager of Bain, he was paid a nice hefty salary and paid big taxes on it. He likely paid taxes on his governor's salary, too. He may have a number of 1099 type incomes, such as speaking engagement fees.

The heavy "almost exclusively" usage is because, like you said, he probably had a bunch of types of taxable income. That said, do you honestly think his speaking fees, salary, etc. were any where near his income that falls within the hedge fund bucket? If you think his salary during those years was hefty, think again. That's generally not how people make their money running those funds.

Again, I'd be surprised if Romney really paid zero taxes like Reid is claiming. I'm guessing there are other things he'd rather not have disclosed.

Interesting that links about the horse thing are out there. I read one article about it, but haven't heard anyone say anything about it. Guess I shouldn't be surprised because it's exactly the sort of thing politicos like to harp about.

 

[mobes23]

Obviously, I can't speak for others, but I definitely don't think that low tax rate means he has done anything illegal. It's got to be at least a little politically awkward for him, but that should be pretty obvious. Heck, I guess I am a little annoyed that I'm paying a much higher tax rate than he is despite making a fraction of what he does, but isn't everyone?

I don't think that loophole makes sense and I think it should be closed. Closing it won't come close to solving the debt, but every little step helps.