You know the KISS rule: “Keep It Simple, Stupid.”
When it comes to taxing wealth vs. taxing work, what’s become known as the “Buffett Rule” is an elegant example of the KISS principle at work. Income is income. It should be taxed at the same rate, whether you’ve earned it by trading stocks or by being the janitor at the stock-trading office.
It’s a principle that apparently presidential candidate Mitt Romney has no interest in adopting.
His status as the presidential candidate who has profited the most from the lower tax rate on capital gains and carried interest — hence his paying only about 14 percent federal tax rate — is well known. So is the discomfort people have with putting someone who is so clearly allied with the interests of the 1 percent in the Oval Office at a time of record income inequality.
In trying to satisfy his Wall Street underwriters and his own financial interests, while at the same time trying to throw a crumb at workers who don’t think they should be paying higher tax rates than millionaires, Romney turned himself into a bit of a pretzel when asked about whether carried interest, the share of the profits received by hedge fund managers for their role in managing the fund, should be taxed as regular income. Business Insider quotes Romney:
“I think you have to look at each dimension of our income streams and ask if this is a true capital gain or carried income. And you look to either the Courts or the IRS to and look at the various structures and investment vehicles and say ‘gosh is this a true capital investment with the risk of loss or is it instead ordinary income with no particular risk of loss. If it’s ordinary income you should treat it as ordinary income and if it’s capital gain you should treat it as capital gain. I don’t believe that it’s Congress’ job or the Administration’s job to say ‘hey these people are making too much money lets change their tax rate to make them less able to be financially successful.’ I think you do however need to apply the code in a way that’s consistent across the board.
Oh yeah, let our stacked courts and our hard-working but seriously strained Internal Revenue Service figure it all out. This is a recipe for making the tax code even more arbitrary and subject to the gamesmanship that only the big players with their armies of accountants can win.
There is a legitimate debate to be had about the kind of incentives that should be in the tax code to encourage investment. But there should be no debate that the last 30 years of taxing wealth at a lower rate than the earnings of working Americans have been a disaster. It is a disaster from which Romney has profited handsomely, so I get why he is loathe to take our tax policy in a different direction. But if he really wants to present himself as a candidate who is fighting for a tax code that will benefit the entire economy, and not just enrich a select few at the top, he would just say: “When it comes to taxes, I believe in the KISS rule. Whether your income comes from flipping stocks or flipping burgers, we should keep it simple: Tax wealth and work at the same rate.”