Mitt Romney, one of the richest men to run for president, says he "probably" pays an effective federal income tax rate of about 15 per cent - little more than most American workers struggling to make ends meet in the toughest economic conditions for 70 years.
Capital gains in the US are taxed generally at 15 per cent; likewise earnings from investments, such as dividends. Individuals earning up to $US34,500 a year fall in the 15 per cent federal income tax bracket, then pay 25 per cent to $US83,000. The top income tax rate is 35 per cent. (Americans also pay state and municipal taxes.)
Unlike investment earnings, wages are subject to Social Security and Medicare payroll taxes.
Tax breaks reduce the effective rate for most people. According to the Tax Policy Centre, in Washington, the average US household would pay 9.3 per cent in federal income tax in 2011 - but 19.7 per cent in all federal taxes once imposts were included.
Even this old bugger can see the point here.
Harking back to the 1% debate in this country, the difference in income taxation depends not on the type of income but on the ability to employ a good tax accountant.