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It’s no surprise that politicians have difficulty relating to their constituents. When Mitt Romney was asked about his finances, he admitted two facts that would sound strange to most listeners.

  • Romney considers what he earned from speaking fees in one year, $362,000, as “not that much.”
  • Like most individuals who earn most of their income from investments, Romney’s effective tax rate is closer to 15 percent.

For Romney $362,000 may not be that much. His net worth is estimated to be between $85 million and $265 million. The most that income from speaking can increase his net worth each year is by 0.4%. That is a drop in a very large bucket. I can understand why Romney would say that this amount is not that much. For him, it’s practically nothing.

For most people, though, $362,000 is a significant amount of money. This small portion of Romney’s annual income could support ten families or more of four members for one year. “Not that much” is relative.

When President Obama proposed the Buffett Rule, a tax on millionaires to pay a representative share of the tax burden, he had people like Romney in mind. Buffett has pointed out that his effective tax rate is lower than his secretary’s, and this happens when most of an individual’s income comes from investments. Investment income, like dividends, as well as carried interest, is taxed at a 15 percent rate rather than the sliding scale used in the tax brackets for ordinary income. People who earn high enough salaries and wages pay higher tax rates than individuals who make a living off investments.

To compare Romney with his political peers and competitors, Governor Rick Perry has indicated his effective tax rate in 2010 was 23.4 percent, and that rate is closer to what most middle-class Americans might pay in any one year. Rick Perry is the least wealthy of all the presidential hopefuls, with a net worth between $1 million and $2.5 million. President Obama and his family paid an effective tax rate of 25 percent in 2010.

How does your effective tax rate compare to Mitt Romney’s?

Update: ABC News just broke the story that Mitt Romney has made judicious use of an offshore tax haven in the Cayman Islands to shelter his assets from the U.S. Treasury.

Tax experts agree that Romney remains subject to American taxes. But they say the offshore accounts have provided him — and Bain — with other potential financial benefits, such as higher management fees and greater foreign interest, all at the expense of the U.S. Treasury. Rebecca J. Wilkins, a tax policy expert with Citizens for Tax Justice, said the federal government loses an estimated $100 billion a year because of tax havens.

Christian Science Monitor, ABC News

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When politicians are campaigning, some try to reinforce the idea that they are similar to most Americans. Candidates for President of the United States try to avoid being labeled as elitist, because some sort of connection and kinship with their constituency is important for winning the favor of voters who aren’t already entrenched with a Democrat or Republican ideology.

Of course, the attempt to be viewed as an “average American” is nothing more than marketing and public relations. In order to find one’s way into the political arena at that level, you need to carry something that sets you aside from most Americans. And while money doesn’t guarantee a victory, it doesn’t hurt.

CNN has reported the net worth and income of the Republican presidential candidates as well as President Obama to see how they compare with each other. Like most Americans, they generally have wealth tied into their homes, but their investments, and in some cases, major liabilities and use of blind trusts, show that this crew lives in a world unfamiliar to most Americans.

Mitt RomneyMitt Romney’s net worth is between $85 million and $264 million. This is a wide range; with lenient reporting requirements, it’s difficult to be specific. He earns most from dividends and interest on his investments as well as from speaking engagements. Romney includes horses and gold among his investments. According to the Federal Election Commission, Mitt Romney has raised $32 million for his campaign as of September 2011 (the latest data).

Jon Huntsman’s net worth is between $16 million and $72 million. CNN points out that Huntsman’s father is one of the richest men in the world, as has donated more than $1 billion to universities and medical research. Huntsman has raised $4.5 million for his campaign as of September 2011.

Newt Gingrich’s net worth is between $7 million and $31 million. Last year, Gingrich earned $2.4 million from his own company, Gingrich Productions, and most of his assets are tied to this company. He also has listed up to $1 million in liabilities in the form of a line of credit with Tiffany and Co. Gingrich has raised $2.9 million for his campaign as of September 2011.

Barack Obama’s net worth is between $2.8 million and $11.8 million. Thanks to sales of his books, Obama can count himself among the richest politicians. He also earns a $400,000 salary as President. Obama has raised $88 million for his re-election campaign as of September 2011.

Ron Paul’s net worth is between $2.4 million and $5.4 million. This includes a five-year personal bank loan of up to $500,000. As a fan of gold, Paul has major investments in companies involved with gold and silver mining. Paul has raised almost $13 million for his campaign as of September 2011.

Rick Santorum’s net worth is between $1 million and $3 million. Santorum’s wealth is in rental real estate properties. He also has mortgages comprising debt of up to $750,000 on properties with a value of up to $1.25 million. He earned $1.3 million from January to August 2010 as a contributor on Fox News and from the Ethics and Public Policy Center think tank. Santorum raised $1.3 million for his campaign as of September 2011.

Rick Perry’s net worth is between $1 million and $2.5 million. The “poorest” of all presidential candidates, Perry receives a $133,000 salary as the governor of Texas. He has a diversified portfolio of stock investments. Perry raised $17 million for his campaign as of September 2011.

Should the individual who represents the United States of America domestically and globally be a reflection of American society? Does wealth tie into that equation?

Photo: Maassive
CNN, Federal Election Commission

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There’s some evidence that the first number mentioned in salary negotiations serves as an anchor. As an employee, you can influence the employer’s final salary by asking for a high number up front. That high number, you may know, is out of the employer’s range, but by asking for a somewhat reasonable high number, you’re making an impression that continues to influence the following discussion. If you allow the employer to make the first offer, and it’s low, they may have successfully anchored the number in your mind. As a result, you may accept a salary lower than you would have otherwise.

In a controlled study published in the Journal of Applied Psychology, researchers have reason to believe that offering a ridiculously high salary proposal — even as a joke — is just as effective as an anchor. Although both parties may laugh off a $100,000 starting salary for an administrative assistant, for example, the same anchoring effect is at play during the subsequent negotiation. In the study’s simulations, candidates who started off the negotiation with a ridiculous request received 9% higher offers on average.

Here were the parameters of the study.

  • Participants were asked to role play in a simulation. The employer had offered the job of an administrative assistant to the applicant.
  • The applicant had a previous salary of $29,000.
  • When asked for salary requirements, the control group asked for a reasonable salary while the test group kiddingly asked for $100,000.

There’s another interpretation that it doesn’t appear the researchers have considered: starting what is usually a tense and stressful conversation with levity could put all parties at ease, and that might encourage everyone to work together to find an agreeable compromise. Also missing is a true real-world experiment. Simulations are valuable from a theoretical perspective, but until this technique is tested in a real-world environment, it will be hard to say whether a joke salary request will have a real positive effect on negotiations from the candidate’s point of view.

Would you be willing to start your salary negotiation with a joke?

Journal of Applied Psychology, TIME

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As we may be currently living in a buyer’s market in real estate, it’s also a buyer’s market in employment. With employers cutting back due to the economy over the past few years, companies are surviving with fewer employees. For any open positions, employers have the luxury of being very picky about who they hire. Any employer is within its right to select the best candidate for the job, and as a result, people who have been out of work for some time are finding it hard to get a job. Because employers see a candidate’s unemployment as a sign of risk, many employers aren’t even considering candidates who have a period of unemployment on their résumé for interviews.

Overall, this puts the unemployed class in a tough position, because their period of unemployment will just grow, making it even less likely they’ll qualify for a job in their field. Even going back to school or switching careers, two typical suggestions for dealing with extended unemployment in the past, may not be able to help workers today as companies have a wide array of potential employees who haven’t had any type of break or switch.

In New Jersey, the state passed a law forbidding employers from posting job wanted ads that turn away unemployed workers, moving towards considering this group a protected class, like a minority. The law as it stands likely won’t help. Even if companies do not include the message in their ads, hiring managers and recruiters can still easily turn away the unemployed at a later stage in the process.

The best solution I can suggest for someone who is stuck without the ability to get hired for an extended period of time is no longer to take the extra time to increase skills or education level, but to find away to become an employer rather than rely on an employer. Start a consulting business in your field. There is always the danger of failure, but at least you’ll be continuing to work in your field, networking with people in your industry, and staying abreast of the latest trends. In most cases, you won’t need to lay out a major investment in order to become a consultant, but you will likely need to work hard to compete for clients.

It may not be immediately clear how to turn your job into your own company. You may not be doing exactly the same type of work you were doing before you were laid off, but with some thought, there will always be an answer. I understand that being your own boss requires a certain type of personality and a strong sense of self-motivation, qualities that not everyone possesses. Some people consider “entrepreneur” to be a word with negative connotations. These are obstacles that can be overcome, though.

Your own company, in place of unemployment, will look much better on your résumé, and if your business is successful, you may never need a résumé again. Turn the tables on unemployment. In this market, the employer has all the power. Rather than waiting for the market to change, become an employer — or at least a one-person company including yourself.

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