Let us begin with a famous quotation from Judge Learned Hand in a decision affirmed by the Supreme Court:
Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff’d, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935)
Quite simply, I am really tired of hearing about Mitt Romney’s tax returns. Does Team Obama really want us to believe that if Mitt Romney took advantage of every legal option to lower his tax bill that he is somehow bad, out of touch with the majority of Americans, or unpatriotic (whatever that is supposed to mean)?
One of the worst “loopholes” from the point of view of economic efficiency and the revenue consequences is the mortgage tax deduction. This is the staple of middle-America and the American dream! And then there is the non-taxation of employer-provided health insurance, another highly distortive “loophole” and source of many problems in the healthcare market.
I am in no way arguing that the tax burden on middle-class Americans be increased. But I am saying that the two “loopholes” that do much of the damage to our economy are the ones that the many, many people take in their own interests. We do not begrudge them that, given that the tax law is what it is.
Suppose a friend of yours were to tell you that he is not taking the mortgage-tax deduction even though he entitled to it. Further, he is paying more tax than he owes (as he is explicitly allowed to pay down the national debt) as an offset to his employer-sponsored health insurance tax exclusion. What would you say to him? Most would say, “idiot.”
So I hope Mitt Romney has not been a tax idiot. I would not respect a candidate who was. Of course, he may be doing himself political damage. That is a separate issue derived from the fact that Team Obama knows much about the ease with which a good chunk of the American people can be diverted from thinking about the state of economy.