The Ryan plan -- formally, the "Roadmap for America's Future" -- "promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax." Mitt Romney's income -- more than $20 million each of the past two years -- comes almost entirely from capital gains on his investments, or from "carried interest," a cut of Bain Capital profits that are taxed as capital gains (the infamous "hedge fund loophole.") His only major ordinary income was from the speaking fees he collected ($374,000, or "not much," as he put it.) This explains why his tax rate was only 13.9 percent last year -- because the capital gains rate is 15 percent, well below the top rate of 35 percent for ordinary income.
But if the capital gains was eliminated altogether? Well, let's let Romney explain the result in his own words, as he did at an NBC primary debate in January:
Hours before he plans to release his 2010 tax returns, Mitt Romney noted at the GOP debate in Tampa that under his opponent’s tax plan, he wouldn’t have paid any taxes at all. The moment came after Newt Gingrich joked about Romney’s 15 percent tax rate, saying: “I’m prepared to describe my flat tax as the Mitt Romney flat tax.”So, at the very moment when we're all tittering over Harry Reid's wild accusation that Romney paid no taxes for the past decade, Romney picks a running mate whose plan -- supported by virtually the entire GOP congressional caucus -- would have him paying, well, no taxes.
Romney jumped in to ask: Do you tax capital gains at 15 percent or zero percent? Gingrich’s answer: Zero.
“Under that plan, I’d have paid no taxes in the last two years,” Romney said, alluding to the fact that all his income is from investments.