The 15%

We were in the lawyer's office discussing my wife's "considerable" inheritance. As it turns out it was more potential than real. Anyway, the lawyer was talking about investments and how to manipulate them to limit tax exposure. And my wife said, what about "capital gains"?

Capital gains? As a Stanford graduate with a Masters Degree capital gains were what people of my "class" talked about right? When I read the financial section, capital gains are discussed frequently. How to handle capital gains. What is the best investment strategy to maximize capital gains? The state of California taxes capital gains too highly. You get the drift.

That was the first time in my LIFE anyone had discussed assets in which I had a stake as capital gains. For a salaried school administrator, who did alright pay wise, capital gains just were "out of my pay grade".

And they are for the vast majority of Americans. Substantial capital gains might have come up in the housing bubble, as a house sometimes doubled in value. The Bush tax cuts for sure made the housing bubble worse, because they cut those for most, one time capital gain. And people got real stupid with the windfall!

People then took the money and usually poured it into another house (or two), banking on the bubble lasting forever. And, of course, most lost it all.

"It takes money to make money". This is a truism that I have heard all my life. It takes smart money to make healthy growth. Fast bucks usually blow up in your face!

When I was at Stanford, and knew Romney, his money came from his father's work, and the capital gains they no doubt got from Governnor Romney's stock and investments he earned from General Motors. Even in those days, C.E.O. were rewarded with stock and investments (usually in the company), that went up and up even though they were "retired".

Mitt Romney is the same. He does not work. In fact, he brags on being "unemployed" and yesterday finally admitted his tax rate is about 15% because all of his income comes from interest from capital gains.

I get a teacher's pension, a sliver of social security, my wife's pension, and her social security. Yesterday we got our social security benefit summary for 2011. Guess what, we made enough in pensions and such that our social security will be considered income, and taxed at about the 27 to 30% we pay....and we can now afford an accountant.

So we pay roughly twice what Mr. Romney pays to in taxes to the federal government. We pay about 25% to the state.

I am not complaining at all about those rates. They are progressive and fair compaired to others ; except for the people in Romney's class.

It is not fair that he only pays 15%. It just isn't! IT IS NOT FAIR!

When Romney was asked about other income, he stupidly blurted out he made a small amount (I am paraphrasing, what he said was more clueless) giving speeches. He then felt it necessary to emphasize how small it was.

Evidently he had to divulge this in his election papers, and the "small" amount is $350,000!

That is more income than about 95% of Americans make in a year. Heck, it is more than most Americans make in five years!

Romney is clueless. He is so wrong that it is funny. He promises to make Bush tax cuts permanent. These same capital gains cuts, caused the housing bubble. That's right, they caused the housing bubble, because they put billions more into the super rich, who then invested them back into the economy.

Hey, wait a minute, you are saying. That is Reaganomics right? This is the way it's supposed to work.

Right, but tax cuts to stimulate investment have no guarantee if they will be smart investments.

I still remember in 2005, driving north from Phoenix, through thousands of new housing developments. The super rich had done what even the middle class did, poured money into housing in the mistaken belief that such investments were gold.

Of course, any cursory analysis of people's ability to buy houses in 2005, would have shown housing prices had greatly passed the ability of the middle class to afford the inflationary prices. The housing bubble priced millious out of the market and killed it!

And capital gains tax cuts fed the housing inflation. And capital gains tax cuts fed the Great Recession.

The 1% does not have a guarantee corner on smartness. The 1% are highly educated, but the lure of a quick buck can mess anybody up. They took their capital gain tax cut, and invested it in something that killed the economy.

And they helped created a deficit that is one of Romney's targets if elected. Of course, the first step to correct the problem, is to make his rate 35% rather than 15%.

That will happen when pigs fly.