Mitt Romney might need some help defending his considerable wealth or controversial career in private equity. But he doesn't need the kind of help Bill O'Reilly is offering.
Mitt Romney's declaration that he pays about a 15 percent tax rate on his income has generated plenty of chatter, in part because it confirms that much of the Republican candidate's yearly income is taxed at a rate appropriate for capital gains and dividend income–much lower than if Romney were actually working for a living.
But enter into the picture Fox host Bill O'Reilly, who apparently thought he should rescue Romney by making an argument that even the candidate himself isn't making–that Romney is being taxed twice. On a segment last night (1/18/12) with two progressive guests (an exceedingly rare sight on Fox), O'Reilly explained things to Heather McGhee of the think tank Demos:
O'REILLY: Do you know what the 15 percent rate is all about. Do you understand that?
McGHEE: Yes, absolutely it's about his capital gains.
O'REILLY: OK, so ordinary income in Romney's tax bracket taxed at 35 percent, right.
O'REILLY: OK, so he already got taxed 35 percent on his investment money. It's already been paid. So then he invests it, all right, and he gets more money from the investment in which he pays another 15 percent on top of the 35 percent of anything that he makes…. So isn't it misleading to tell the public, as Warren Buffett has done, that Romney's whole resume is a 15 percent deal? Isn't that misleading?
This would be slightly more convincing if it were accurate. As Pat Garofalo pointed out at Think Progress (1/17/12):
One of the reasons Romney is able to drive his tax rate down so low is that he is still earning money from his private equity firm, Bain Capital, that is likely subject to a pernicious tax loophole. This loophole lets wealthy money mangers like Romney pay the capital gains tax rate on profits they make investing other people's money, turning the justification for having a lower capital gains tax rate completely on its head.
The other guest on O'Reilly's show–Public Citizen's David Arkush– tried to point this out:
O'REILLY: But Mr. Arkush, do you see my point here about Mitt Romney? He paid his fair share, 35 percent on the money he made when he was in the work force. He got out of the work force and he's living on his investments and paying another 15 percent on top of the 35. One percent, and I'm in that 1 percent, pay 37 percent of the income, and you're going to sit there and tell me I'm not paying my fair share? Come on.
ARKUSH: Well, I actually think you're mistaken about Mitt Romney. One of the things that's going on here is he's actually exploiting a tax loophole in paying only 15 percent. He didn't pay 35 percent on his original income. He got to treat ordinary income, which most people would pay a regular tax rate on, as capital gains.
It was at this point that O'Reilly interrupted:
Did he do anything illegal? Did he do anything illegal, Mr. Arkush?
Of course, that's entirely missing the point, which is that a perfectly legal tax loophole allows Romney to earn millions of dollars and pay little in income taxes. If Romney were really being taxed twice, as O'Reilly seems to think is the case, you'd think he might make that argument himself.
O'Reilly closed the segment by telling his guests, "We're going to continue the discussion; I think you're both good guests." Let's hope it corrects his misinformation.