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From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.
MELISSA BLOCK, HOST:
And I'm Melissa Block. Today, in Detroit, Mitt Romney talked taxes.
MITT ROMNEY: Let's get a tax policy that encourages growth and investment and doesn't just penalize people for being successful.
BLOCK: Successful is certainly what Mitt Romney has been as far as personal wealth and Romney's own taxes have become an issue in the campaign. First, his hesitation to release his tax returns and then his acknowledgement last month that he paid a lower tax rate than many middle class families. Well, Mitt Romney's case offers a window into the changing nature of income and taxes in America.
BLOCK: We're going to compare him with his own father, George Romney, an auto executive and Michigan governor. When Romney senior ran for president, he made the unprecedented move of releasing years of tax records. Our story comes from both NPR's Tamara Keith and Scott Horsley.
TAMARA KEITH, BYLINE: In the lead-up to the South Carolina primary, pressure built on Mitt Romney to release his tax returns. And his father's 1967 tax dated dump wasn't helping his case. Here's CNN debate moderator John King challenging Romney to live up to his father's example.
JOHN KING: He released them for not one year, but for 12 years. And when he did that he said this, one year could be a fluke, perhaps done for show. When you release yours, will you follow your father's example?
ROMNEY: Maybe. You know, I don't know how many years I'll release.
KEITH: Ultimately, Mitt Romney released just one year's return, 2010, as well as an estimate for 2011. His effective tax rate was just below 15 percent.
SCOTT HORSLEY, BYLINE: George Romney's returns tell a different story. His tax rate most years was two to three times that of his son. It topped 44 percent in 1963. That's the year the elder Romney was sworn in as Michigan's governor, with an eye toward rewriting that state's tax code.
GEORGE ROMNEY: Our tax structure must be reshaped to strengthen responsible local government, to remove obstacles to job producing enterprise...
KEITH: One big change between George Romney's time and our own is the top marginal tax rate. If you think tax rates are high today, think again. They were a lot higher in the '50s and '60s.
HORSLEY: 91 percent, that was the top marginal tax rate in 1955, the first year of George Romney's returns. Tax relief came along under Lyndon Johnson, but the top tax rate remained a whopping 70 percent. Joseph Thorndike is director of the Tax History Project at Tax Analysts.
JOSEPH THORNDIKE: Definitely the 1960s were a different time than today. People were more comfortable with higher rates than we are today.
KEITH: That comfort level would soon change, though, and for the next 20 years, the top income tax rate moved in one direction, down.
THORNDIKE: It comes down to 50 percent in the 1970s and then it drops down even further in sort of the mid '80s under Ronald Reagan to 28 percent.
HORSLEY: But Reagan made a lot of trade-offs to achieve that lower rate. While taxes on ordinary income went down, taxes on investment income, like capital gains, went up. For the first time in modern history, money made from working and investing was treated equally. It didn't last. Once again, historian Thorndike.
THORNDIKE: Essentially since the beginning of the income tax there's been a preference for capital-gains income. That's partly because economists thought it was a good idea. It's partly because politicians thought it was a good idea.
HORSLEY: Bill Clinton restored the tax advantage for investment income, and George W. Bush made it bigger. Today, qualified dividends and capital gains are taxed at just 15 percent, less than half the top tax rate for ordinary income.
KEITH: That's a big windfall for those like Mitt Romney, who make most of their money from investments. In 2010, nearly three-quarters of Romney's $21 million income was taxed at the lower capital gains rate, a tax rate he defended at last month's CNN debate in South Carolina.
ROMNEY: I'm not going to apologize for being successful.
HORSLEY: George Romney also benefited from the tax discount on capital gains, especially in years like 1960, when his investment income neared half a million dollars. The elder Romney earned most of his fortune as head of American Motors Corporation.
KEITH: His son Mitt followed a different course.
ROMNEY: I could have stayed in Detroit like him and gotten pulled up in the car company. I went off on my own.
KEITH: The younger Romney made his money buying and selling companies for a private equity firm. And that's another generational change. MIT's Simon Johnson says finance, not industry, now dominates the U.S. economy.
SIMON JOHNSON: If you look at where smart young graduates from top schools want to go to work, a lot of it is in and around the financial sector. You hear some, but not a lot, of people saying they want to go work in manufacturing. But finance is still a huge draw for talent.
HORSLEY: And those who do go into finance, like Mitt Romney, can not only make more money than their forebears in manufacturing, they're also able to keep more thanks to the design of the American tax code. I'm Scott Horsley.
KEITH: And I'm Tamara Keith, NPR News, Washington. Transcript provided by NPR, Copyright National Public Radio.