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.
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:
- 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.
- 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.)