I know, this might not be the most “popular” post, and I’m far from a Mitt Romney fan, believe me. That being said, am I the only one that finds it a bit over the top to criticize him for paying 15% of taxes. He’s not the one that put in place tax incentives and tax breaks. Sure, you could blame him for voting against repealing those tax breaks while being in favor of others. Clearly, guys like him are probably not the ones that should be able to escape tax increases in the coming years.
That being said, if possible, please set aside that part of the debate. Let’s only talk about the fact that there is outrage all over the country over the fact that Mitt Romney has been paying less than 15% of taxes on his income in the past 2 years despite being in that “1% group”.
It’s sad to say but there are countless ways to legally avoid paying taxes. With the internationalization, it is becoming much easier for companies to pay almost no taxes as has been discussed in some of my previous posts. As individuals become richer, their income and tax situation can easily become similar to what companies are able to do. I’m not saying it’s fair but it’s the way things are. Until we admit that fact, we’ll be stuck arguing on details. Are there solutions? Yes. But they’re not easy at all.
Mitt Romney is paying less than 15% on his taxes. What does that prove? That he was smart enough to get help to legally diminish the amount of taxes that he paid.
Wouldn’t You Do The Same?
I mean honestly, if you have 2 stocks, one that pays high dividends and another that will accumulate capital gains, you’d be smart to put the one that pays dividends in a tax deferred account such as a 401K or a RRSP (in Canada). That would be the smart thing to do. Trying to get all possible deductions that you are allowed under the tax code is also SMART.
I mean seriously, when is the last time you passed on a deduction in order to do “your fair share”?
“Yes, But He’s Rich”
That would be the common argument. Sure, Mitt Romney is rich. But chances are that you are also much richer than the average American. At what point should you “stop looking for ways to improve your bottom line”? I’m not talking about acting illegally or anything like that. At what point? When you make $50,000/year? 100K? 200K? $1 million? There is no clear answer of course.
Mitt Romney Has Many Issues To Defend
However, I don’t see paying few taxes as being one of them. It simply proves that he is smart and plays by the rule.
Tax Efficiency Is Too Often Overlooked
I personally think that being tax efficient is critical over time and makes a huge difference. Why so many investors spend tons of time on asset allocation, commissions, fees for funds/ETF’s and other areas without even spending a few hours to optimize their tax expenses blows me away. It can end up making a tremendous difference.
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