By Edward J. McCaffery, Special to CNN
updated 1:59 PM EDT, Mon September 24, 2012
Editor's note: Edward J. McCaffery is Robert C. Packard Trustee Chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of "Fair Not Flat: How to Make the Tax System Better and Simpler."
(CNN) -- By now, most of us have probably heard that Mitt and Ann Romney paid just under $2 million in taxes on income -- virtually all from investments -- of just under $14 million for 2011, an effective tax rate of 14.1%. This is a low tax rate, lower than the typical middle-class American worker pays, especially when one considers payroll taxes, the largest burden for most Americans. It should concern us that individuals of Romney's wealth -- analysis has put his personal fortune as high as $250 million, not counting some $100 million in trusts set up for his five children -- pay so little as a percent in taxes.
It is also correct to note that there appears to be nothing wrong or illegal in the tax returns that Romney released. Sure, there are still many unanswered questions, and speculation and innuendo will no doubt continue.
But all of that is beside the point, or ought to be.
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The knee-jerk reaction is to raise tax rates, as in the so-called Buffett Rule: Anyone earning more than $1 million should pay an effective rate of at least 30%. If this rule were in place today, it would more than double the Romneys' income taxes.
Only, it wouldn't. The Buffett Rule wouldn't work, because really rich Americans do not have to show any "income" on their tax returns.