Donald Lambro
WASHINGTON - Former Massachusetts governor Mitt Romney estimates the federal tax rate he pays on most of his income is about 15 percent because it comes from his past investments.

That may sound shockingly low to many middle income Americans who pay tax rates of 25 percent to 28 percent or higher, but the 15 percent is in the federal tax code for a good reason: to encourage capital investment which is the mother's milk of a growing economy.

Romney, who said he will release his tax returns about April, pays the same tax rate anyone else does on income from capital gains from the sale of stocks, bonds, or from dividends and other securities.

While Romney is a millionaire, any American who buys a share of stock and sells it for a profit, or is paid dividends from that stock or other investment, or sells a home would would pay the same rate Romney does.

Investments that pay a return in long term or short term capital gains or dividends, is not just for the wealthy. Tens of millions of workers who invest in 401(k), IRA or Roth savings plans, or through their mutual funds, or stock portfolios, receive the same tax break and that income is taxed at 15 percent.

If you were to buy stock in Verizon, which is about $39 a share, it would pay you a yearly dividend of $2. That's an effective yield on your investment of 5.1 percent -- not bad at a time when most banks are paying less than 1 percent.

Buy some AT&T stock at $30.38 and it would pay you $1.76 per share, an annual yield of 5.8 percent. Where can you get that in today's economy?

But the federal tax on that income would be 15 percent, too.

President Obama, who wants to raise income taxes on big corporations, small businesses who file as individual taxpayers, investors and almost anyone who makes big money, thinks the 15 percent tax is too low.

He's fond of relating billionaire stock investor Warren Buffet's complaint that his private secretary at Berkshire Hathaway pays a higher income tax rate than Buffet does. The reason: virtually all of Buffet's income is from capital gains and other forms of investment, so he pays 15 percent, too.

You never read in the newspapers that his secretary is also an investor and income from her investments is also tax at the 15 percent rate. Earned income is taxed at the regular rates between 10 percent at the bottom and 35 percent at the top.

For the past four years, Obama has been beating up rich people, saying they are not "paying their fair share" in income taxes when, in fact, they pay most of the income taxes that flows into the U.S. Treasury.


Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.