Mitt Romney’s Income Tax

This article was written by Pierre Lemieux, an associate professor at the University of Quebec in Outaouais. Lemieux is famous for his book “A Crisis Can Hide Another” (Oxford University Press, 2010).

Right next to California in the Southwest United States you will find Nevada, a sparsely populated state in which the average income is slightly lower than the national average. The Republican primary in Nevada was just won by candidate Mitt Romney. Not only are prostitution and gambling legal there, but this state also ranks sixth in the Freedom in the 50 States study released by the Mercatus Center.

In this state, where the spirit of conquest of the Old West remains alive, Libertarian candidate Ron Paul did well, winning 19 percent of the vote, after he only won 14 percent back in the 2008 Republican primary. It is also not surprising that Rick Santorum, the Christian Republican candidate, ranked fourth, right behind Paul. Will Nevada be the well in which Santorum falls, like Jules Verne’s character in “The Will of an Eccentric”?

$20 Million Annual Incomes

Romney was barely recovering from the controversy about his low federal income tax (only 15 percent) at the time of the Nevada caucus. Many people thought this scandal would be harmful to the candidate’s campaign. However, Nevada voters showed that despite their dormant populism, Americans are not as driven by jealousy as voters from many other countries.

The American income tax structure is more progressive than in several European countries, as professor Peter Baldwin observes in “The Narcissism of Small Differences.” If Romney and his wife, despite making more than $20 million annually, manage to pay an average tax rate lower than the middle fifth of U.S. tax payers, it is because their incomes consist mainly of capital gains and stock dividends, which are taxed at lower rates. In addition, Romney’s charitable contributions (mostly given to the Mormon Church) are tax deductible and represent a number equivalent to the income tax he pays.

America is a country of contrasts, where the welfare state, the private charity and the spirit of the Old West coexist.