Yesterday Presidential candidate and former Gov. of Massachusetts, Mitt Romney finally released his tax returns. It appears that he earned something like $43 Million in two years, earnings which come from gain investments. The average tax rate he paid was about 14-15%.
As I noticed surfing the net, all the major news media started to speculate on whether Romney is paying a fair tax rate, on whether he should pay more, and if they can find something compromising on the nearly 550 pages document.
Somebody could think that tax rate is extremely low for an income that doesn't come from wages; but let's go deeper, let's try to make an argument about that.
Once upon a time there were three people, Sam, Tom and John. Sam was rich he had a factory, and had a lot of money. John instead was a kind of poor, he was having and hard time to feed himself and his family. Sam and John didn't know each other, but they had a common friend, Tom. We actually don't know if Tom was rich or not.
Once John decided to ask for help to his friend Tom. Tom didn't have extra money but he remembered that Sam was a rich guy.
So one day the three met together, they talked about John and how he was struggling to work and earn money; the guys finally reached an agreement, and they eventually signed a contract.
Every month Sam would have given some money to John. Sam thought it was right to help the poor.
Since Sam and John lived far apart Tom offered to be through, he would have pick up the money from Sam every month and give it to John.
For the first three months Tom gave all the money he received to John. Then he realized that he was spending energy and money to go from Sam's to John's house and started to keep a little bit for himself as a refund, although nobody knew it. To help more people Tom made agreements with other rich people nearby, and started to run a real business.
John found the situation very interesting, he stopped working and was satisfied with what he received.
After the first year the amount of money Tom kept for himself got higher and higher, he bought a new vehicle, new clothes a big house and other stuff. Clearly he was cheating, in fact he asked the rich more and more money explaining that he was helping more poor people.
I don't know how the writer ended the story but frankly it doesn't matter. What's really important is the meaning of this part of the story:
- John and the poor are the real victims;
- Tom was stealing John's money. If Tom had behaved honestly John would have been happier, but you know opportunity makes the thief!
- it would have been better for John to receive money directly from Sam, under the supervision of Tom, sure somebody was needed to ensure that the contract was fulfilled.
Now, what would the people think, if I say that Tom represents the Government?
If you now rethink the meaning of the story you'll find that:
- fair taxes and a honest government are necessary for the country and to help poor people;
- As the government gets bigger, the chance of corruption gets higher;
- the best way to help poor people is to give 'em the opportunity to get rich, not to deliver money here and there;
- the government has to accept that a lot of charities have a better efficiency in helping the poor, because it's a more direct relationship, and of course it should promote donations.
I recommend not to stop looking at the tax rate somebody pays but keep in mind how much is given to charities.
If you look at Romney's tax returns you'll find a percentage of 16.4%; and if you sum the total amount Romney both paid in taxes and gave to charities you'll find a percentage of about 31%. I personally think it's a fair number.
There is a huge difference between the amount you pay in taxes and the amount you give to charities.
Paying taxes is not a choice, what ever the tax rate is, giving money to charities is a choice and you deserve credit if you choose the right ones.