Marc Lamont Hill: Why the rich get richer

Posted: January 25, 2012

After a great deal of public pressure, Mitt Romney finally released his tax returns. Although not surprisingly, the results were sickening. Romney has paid a little more than $6 million in taxes over the past two years despite earning more than $42 million during that period.

So how did Romney manage to pay an average effective tax rate of 14.5 percent, the same as most Americans, rather than the 35 percent that one would expect for someone in the .006 percentile of American wealth? Easy. Like most rich people, Romney exploited unfair policy to his advantage.

Romney was able to cut his taxable income by $4.8 million dollars by claiming losses in previous years, all of which carried over into the current tax season. Also, most of Romney's income didn't come from ordinary wages, but from interest payments and dividends on capital gains. As a result he wasn't obligated to pay the normal tax rate, but the more favorable capital-gains rate of 15 percent.

Of course, this is mainly a technicality. While his residual earnings from Bain Capital, the job-killing company that he founded in 1984, are counted as investment earnings, they actually are the fruits of other people's investments and should not count as capital gains. Still, Romney was able to use the loophole to duck a much larger tax bill.

Defenders of Romney point to the fact that he has also made $7 million in charitable donations over the past two years. While this is laudable, it does not make up for not making appropriate tax payments. In this case, Romney donated the bulk of his money to the Mormon church, which fulfills his faith-commitment of tithing but does nothing to help the millions of Americans in desperate need of schools, roads and unemployment benefits.

Of course, we shouldn't demonize Romney, as this isn't his fault per se. While he should be roasted for pretending that he's an advocate for the poor and working class, Romney shouldn't be criticized for legally taking advantage of a broken system. After all, who wouldn't do everything they could within the bounds of the law to protect their own money? Very few. But this is precisely why we must change the laws in order to ensure that people pay what they truly owe.

Don't get me wrong. I'm not claiming any moral or civic high ground here. Like everyone else, I cry a little and curse a lot every April when I have to write a check to the IRS. Sure, a small part of me breathes a sigh of relief when I discover a legal loophole that prevents the government from drawing even more blood from me. Still, in the final analysis, I understand that paying taxes is a necessary part of citizenship.

I cannot complain about closing libraries in North Philly or unfilled potholes in Germantown if I'm actively resisting the responsibility of paying my fair share. I can't cry about the crime rate if I'm not contributing the necessary funds for supplementing unemployment, building community centers, creating mentoring programs. Every year that I'm blessed to earn a good wage, I'm charged with a heightened responsibility to secure our nation, strengthen our schools and protect the most vulnerable members of society.

Sadly, we live in a moment when the rich are let off the hook. By constantly crying wolf that another penny in taxes will prevent them from spending, investing or risk taking, the wealthy have pump-faked us into passing the tax burden to the middle class and working poor. Any attempt to fix the system is declared "class warfare" or "wealth envy." Even Democrats, who purport to be the party of the average citizen, have done little to fix a system that allows the richest Americans to pay the least taxes. While Mitt Romney represents an egregious example of this system, there's enough shame to go around for everyone.


Daily News editor-at-large Marc Lamont Hill is an associate professor at Columbia University and host of "Our World With Black Enterprise," which airs at 6 a.m. Sundays on TV-One. Contact him at MLH@marclamonthill.com

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