I’m going to talk Politics. I never talk politics, because after living in DC for five years, I kind of hate politics. But there is a financial issue going on right now that I find interesting.
A big thing during Presidential elections is the release of the candidates’ tax records. Obviously, it’s good to know that our candidates are paying their taxes, aren’t getting money from illegal sources, and it’s nice to see that they give to charity. But really, what does it mean?
So Mitt Romney released his tax records. And he paid around a 15% tax rate while Gingrich paid around 31%. That is a big difference, and 31% is closer to what I pay. Or is it? These people make so much more money than the “average American” that on some level, it’s kind of meaningless. They’re rich. Different levels of rich, but they’re rich.
So the big deal is that Romney’s money all comes from investments. He (legally) didn’t pay taxes on the trusts set up for his kids. He and his wife gave about 15% of their income to charity.
And while that is so far from my understanding that I can’t comprehend the numbers he lives by, isn’t this sort of the American Dream? He founded a company and got rich. I’m not saying he built up from nothing, but he has the lifestyle that many of us dream of. Come on, wouldn’t you love to be able to live off of your investments and spend your life doing what you want? Maybe doing what you want is volunteering or traveling, or maybe it’s doing your job because you love your job. But that’s some awesome freedom.
Does this mean that Romney can understand the plight of the average person who struggles to pay their bills? I have no idea – but I don’t think any of the candidates truly understand that. They’re all wealthy, some just happen to be more wealthy than others.
I’m not endorsing Romney in this post. I’m not not endorsing him either. I really don’t have an opinion of the man, or of any of the Republican candidates. But I find the focus on their personal finances very interesting.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
I completely agree. I loved how Gingrich was attacking him for paying a low tax rate. Isn’t that a Democrat attack line?
Not only did Romney only pay $3M in taxes, he made $21M off of investments. I mean, to put it in perceptive, $10M in investments would need a 5% return to make just $500,000.
Let’s assume he’s better at investing and was able get a 10% return, that means he has $210M in investments. Unbelievable.
Bottom line… who cares how much they make. Some people say that they can’t relate to “average Americans”. I disagree. Romney, Gingrich and Obama all worked incredibly hard to get to where they are now, so I think they can relate much more than most people think.
her every cent counts says
I’m torn on this. I agree it’s the American Dream to get rich and live off capital gains. It’s amazing that he is able to do so well in interest, and at the same time if he is doing that well he also is likely taking a lot of risks and can loose a lot of money if the stock market tanked as well. I often have this argument with my boyfriend who is super liberal — he just doesn’t get capital gains tax. I believe in it because I think it’s important to reward people for taking a serious investing risk and holding it for the long term. However, when you get to be so ridiculously wealthy where you don’t even have to work and pay income tax, perhaps there should be more of a tax involved on your earnings. It’s hard to say at what bracket that should start, but probably for couples earning more than $1M per year… maybe anything above that should be taxed at income tax rates?