Mitt Romney has told reporters that he pays an effective tax rate of roughly 15 percent on his income. Newt Gingrich, wealthy but not in the same league as Romney, has released tax returns that indicate he paid an effective rate of 32 percent, more than twice as high as Romney’s rate.
How is that possible? Well, we still don’t have Romney’s tax returns, so all we can do is make highly educated guesses at this point. Romney tells us that “my income comes overwhelmingly from some investments made in the past,” and under federal law those dividends and capital gains are taxed at only 15 percent.
In Romney and Gingrich, then, we’ve got useful examples of two types of taxpayers: those who receive most of their income through investments, what used to be called unearned income; and those who receive most of their income through actual work, such as serving as historian to Fannie Mae. Those who earn their money directly pay much higher taxes than those who receive it through