Speaking to CBS' '60 Minutes' on Sunday night, GOP presidential nominee Mitt Romney defended paying a lower rate of income tax, 14 percent, than a middle class American earning $50,000 a year.
'60 Minutes' Scott Pelley asked: "Now, you made on your investments, personally, about $20 million last year. And you paid 14 percent in federal taxes. That’s the capital gains rate. Is that fair to the guy who makes $50,000 and paid a higher rate than you did?"
Romney answered: "It is a low rate. And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35 percent."
Pelley then asked: "So you think it is fair?"
Romney replied: "Yeah, I think it’s the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work."
However, the idea of lower taxes for the wealthy somehow creates more job and a stronger economy has been debunked numerous times. In fact, the economy did better under President Clinton and other presidents when taxes on the wealthy were higher than today.
Under the so-called 'Bush tax breaks,' the capital gains tax rate was dropped to 15 percent in 2003 and did not create a stronger economy.
Nobel Prize-winning economist Paul Krugman wrote on his New York Times blog:
The current very low rates didn’t happen until 2003; in fact, long-term capital gains were taxed at close to 30 percent from 1986 through 1997, when Clinton cut a deal with Republicans to get an expanded earned-income tax credit. And dividend income also only started receiving privileged status in 2003.
So nothing in our history or experience says that unearned income has to be taxed this lightly. It’s not a time-honored principle; it’s a Bush-era innovation, pushed through the Senate, by the way, using reconciliation.