The Problem With Newt Gingrich's Taxes

Posted on by
Newt Gingrich - Photo By Gage Skidmore

Newt Gingrich - By Gage Skidmore

Last week, Newt Gingrich released his 2010 Federal Income Tax return in a move seen as a way to discredit Mitt Romney with a 1% perception. The big “news” is that Mitt Romney pays about 15% on his $250mln of net worth while Newt Gingrich pays a “more admirable” 31% on his $3.162mln annual income.

Qualified Dividends

The difference in tax rates stems presumably from Mitt Romney’s dividend income, which would be taxed at 15% thanks to the George W. Bush tax cuts. Meanwhile, Newt Gingrich, only received $5990 in qualified dividends. The S&P 500 is an index of U.S. stocks that is generally interpreted to represent the entire market and an average of stability – its dividend yield was 1.98%. This puts an estimate of Newt Gingrich’s stock market holdings at approximately $300,000, or 10% of Newt Gingrich’s 2010 income.

The Problem is the Jobs Plan

The jobs plan that every Republican is running under is that lower taxes increase U.S. investment – which theoretically creates jobs because it helps companies grow. The problem with Gingrich’s stock market investments approximated at only $300k is that he is a perfect example of somebody who is investing very little, even though the tax incentives are already there.

Here are the relevant points of his plan:

  1. Stop the 2013 tax increases to promote stability in the economy. Job creation improved after Congress extended tax relief for two years in December. We should make the rates permanent.
  2. Make the United States the most desirable location for new business investment through a bold series of tax cuts, including:Eliminating the capital gains tax to make American entrepreneurs more competitive against those in other countries; Dramatically reducing the corporate income tax (among highest in the world) to 12.5%; Allowing for 100% expensing of new equipment to spur innovation and American manufacturing; Ending the death tax permanently.

 

 

 

Gingrich’s return also includes $10,754 dividends from tax exempt investments (likely municipal bonds), which suggest another approximate $200k invested. An additional $5,902 are from unqualified (short term or non U.S.) dividends. ( These are still trivial percentages given the small percentage of his income and therefore presumed, much greater, net worth.)

  • http://twitter.com/smileysteve Stephen Reid

    In reply to a comment that legitimately question the validity of estimating holding based on the S&P Dividend rate.

    From his Capital Gains losses, he has recently had

    Ishares Russel 1000 Growth – Various (1.33% div yield)

    Ishares Russel Midcap – Various (1.5% div yield)

    Ishares DJ Select Dividend (3.4%)

    Nuveen High Yield (NA / Bond / Muni Bond)

    Templeton Income (est 5.76% div yield)

    It would be another stretch to guess his investment style based solely on his previous capital gains losses, but, if we did jump to that conjecture, 2% is a pretty reasonable guess.