MSNBC's Politics Nation: Romney's taxes confirm 1% status (Video)

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Segment Transcript

SHARPTON: Now, Romney`s taxes show nothing illegal but someone working a system that`s deeply unfair. You start by earning more than $21 million a year without having a job, then you pay less than 14 percent in taxes and you park your money in offshore accounts and places like Switzerland and the Cayman islands. What these taxes tell us? Is that Willard Mitt Romney is the perfect person to represent the one percent. But can he really claim to have a clue about the rest of us?

Joining me now is Pulitzer prize-winning writer David Cay Johnston. He`s columnist for Reuters and author of the book "perfectly legal, the covert campaign to rig our tax system to benefit the super rich and cheat everyone else" and Rebecca Wilkins, tax expert at citizens for tax justice. And to cover the politics of the all this, Joan Walsh, editor at large for salon.com. Thank you all for coming on the show tonight.

UNIDENTIFIED FEMALE: Thanks.

SHARPTON: Let me start with you, David, Mitt Romney made 42 million over the last two years but paid taxes at lower rate than many middle class Americans. Is that the headline to you out of this story?

DAVID CAY JOHNSTON, AUTHOR, COLUMNIST, REUTERS: Absolutely. A school teacher, a police officer, a nurse who made $54,000 in 2010 paid the same tax rate. If you made $60,000, you were more heavily taxed than Mitt Romney. And the -- the system that allows this is based on this idea that businesses are double taxed and that the rich will not invest and they will not create jobs unless we lower their taxes. Well, we have got years and years of evidence now that that`s just not how it works.

SHARPTON: Now, let me ask you, Rebecca. He put some money in the Caymans and in the -- in Switzerland and in other places. We are showing money all over the world, Bermuda, Ireland, Luxembourg. I mean, what is the tax benefit of that? I know it is not illegal but what is the strategy and why do super rich people do this?

REBECCA WILKINS, CITIZENS FOR TAX JUSTICE: Well, his tax return is 203 pages long and it`s the best illustration I can think of all the things that are unfair about the tax code. Most of the forms in his return are forms that most of us will never have to file because they are about his offshore holdings or the special tax planning he did around charitable trusts and all the ways that the tax code favors the wealthy and allows them really easy ways to reduce their tax rate.

SHARPTON: Now, David. I think that what I want to make clear, we are not begrudging him of being wealthy and we are not accusing him of being illegal. I think the bigger point here is the loopholes and the things that the rich get away with some of the tax laws the way they are. Average Americans don`t benefit from it, many of us. I have had my battles I just solved with the IRS. But we are talking about what is unfair and unequal. I think that`s what really bothers a lot of Americans about this story.

JOHNSTON: America has two income tax systems, Al, separate and unequal. One system is for wage earners and operators of mom and pop businesses who are very efficiently and effectively taxed by the federal government and there`s extensive verification of their income and the minor deductions they are allowed to take.

The other system is for this tiny segment of people, like Mitt Romney, who are allowed to enjoy income now and pay taxes by and by, who are allowed to make use of all sorts of tax treaties and agreements, all of which are legal, but have the effect of making huge amounts of money appear to be nothing to the IRS. And when they do take money, then they only have to pay at this 15 percent rate.

SHARPTON: Now, Joan, the politics of this. Willard and Newt both have had these little questions about income. But on the tax fairness question, which is on the Willard part of this look at what is going on in the Republican primaries, he had suggested -- he didn`t suggested, but he said that we were engaged in the politics of envy. But, isn`t this really about fairness. No one is jealous that he is making all of this money. It`s that out of his money, he is not paying the same percentage in income tax and under the same rules that all of us have to follow.

JOAN WALSH, SALON.COM: Exactly, reverend Al, that`s the point. I mean, it`s so interesting. We have been calling him Mr. one percent. Now do we have to call him Mr. 0.006 percent? It doesn`t roll off the tongue quite as well.

But, you know, just when you were reading the title of David`s great book, which I read when it came out, this has been an obscure issue for so long but I`m glad he put it the way he did. We have two nations, separate and unequal when it comes to the tax system. And Mitt Romney has become the poster boy for that inequity. I mean, you and I would not be sitting here talking about this in this kind of detail even a few months ago. So, between occupy wall street, the president`s change of tone and now, this really great case study and tax on fairness, the whole country is getting an education in things that they really didn`t know.

I mean, I`m not sure I knew some of t you know, I don`t pay those kinds of taxes. I don`t make that kind of money. There`s just a way that for most Americans, the issue of tax, I pay too much. Well, maybe they do and maybe these other people could pay a little bit more and it is also enforce sod unfairly, as David says, they go after -- there`s a real record of them going after smaller earners and business owners and basically ignoring what the Mitt Romney`s do. Maybe they can`t understand it maybe the IRS can`t understand what they are doing themselves.

SHARPTON: The other thing, Joan, is that really comes into focus now, is that they actually fight to keep this. It is not like this is some, you know, system that`s set up and they just kind like it is the way it is. They aggressively fight to keep the system the way it is and have the audacity to accuse those that question it like we`re envious or somehow, wither in wait of job creators when this imbalance is absolutely obscene.

WALSH: Right. And really, let me say God did not create the tax system. This was not in the garden of Eden. Rich people have rigged the system over the years, over and over, to tilt the balance increasingly in their favor. You know, Mitt is able to draw. He`s paid by Bain for work he hasn`t done in 20 years and that payment is taxed differently as capital gains.

They have fought to keep all of these deductions. We have seen in the last year, the slightest change to the tax code proposed by the president is just greeted with class warfare cries. So it is not that this just happened. It is that it increasingly was rigged that way and it is really wonderful that the country is finally figuring it out.

SHARPTON: Now, David, another thing that was a little surprising to me and helps me with this, Mr. Romney, Willard gave $100 million to his children and didn`t have any taxes involved in this transfer of this huge amount of money? How`s that possible?

JOHNSTON: Yes Al, if -- well, Al, it`s because Congress says that the value of this thing called carried interest which is how Romney made his money, if you give it to your children, is zero. So, if you were to give the right to collect say $5 million a year in dividends to your children because you had that right, you wouldn`t -- you would value it at zero when giving it to your children because of the way Congress treats this. And it is absurd that the gift the children got is worth zero, they now have $100 million in their trust fund, who knows how high it would go, and yet the parents pay no gift tax. And normally on $100 million gift to children, you pay a $30 million-plus gift tax.

SHARPTON: Rebecca, it is an issue of fairness. The president will talk about that as the issue of our time it is. This is about fairness. This is about making sure that everyone has the same investment in the country. I think that this, the bringing out of Willard`s taxes, should bring the issue front and center in the country about how unfair and unequal the tax laws for the average American.

WILKINS: I think that`s right. They will show, obviously, that he is paying a much lower rate and that`s because of the things that he can do that most of us can`t do because we don`t have the wealth he has, but also because the tax code taxes work at a lot higher rate than taxes income from wealth.

SHARPTON: Well, the president will be talking about closing these tax loopholes and loopholes for the rich tonight in his state of the union address. We will all be watching within the next three hours. David, Rebecca and Joan, thank you for coming on the show tonight.

WALSH: Thank you.

WILKINS: Thank you.

JOHNSTON: Thank you.

SHARPTON: Coming up, tax troubles may be just the beginning of Willard`s problems. Newt`s making a big money play for Florida.