Romney returns show low tax rate; questions linger

TAMPA, Fla./WASHINGTON Tue Jan 24, 2012 4:18pm EST

1 of 4. The first page of the 2010 U.S. 1040 tax return for Mitt Romney and his wife Ann showing a gross adjusted income of $21,646,507.00 is seen in this document released by the Romney campaign January 24, 2012.

Credit: Reuters/Handout

TAMPA, Fla./WASHINGTON (Reuters) - Republican presidential candidate Mitt Romney bowed to political pressure and gave the public a glimpse inside his personal fortune on Tuesday, releasing U.S. tax returns showing he pays a lower effective tax rate than many top wage-earners.

Unlike Americans who rely on a paycheck, Romney earns most of his income from investment profits, dividends and interest. The returns for 2010 and estimates for 2011 showed that he will pay a total of $6.2 million in taxes on income of $42.5 million.

Romney and his wife Ann paid an effective tax rate of 13.9 percent in 2010 and expect to pay a 15.4 percent effective tax rate when they file their returns for 2011.

Those rates are far below the top income tax rate on wages, which is 35 percent, because the U.S. tax code in recent years has favored investment income over wage income.

Targeting popular unease with rising U.S. income disparity, President Barack Obama on Tuesday night in his annual State of the Union speech at the Capitol will put efforts to make the tax code fairer at the center of his reelection campaign.

Obama will renew his appeal for a "Buffett rule" to ensure that the ultra-wealthy pay their "fair share" of taxes. This idea is backed by multibillionaire Warren Buffett. His assistant Debbie Bosanek - whom he says pays a higher tax rate than he does - will sit with First Lady Michelle Obama for the speech.

One of the wealthiest Americans ever to run for the White House, Romney did not release returns from the years 1984-1999, when he began making his fortune buying and selling companies as a private equity financier with Bain Capital, but those lucrative years did give him a special tax advantage.

THE CARRIED INTEREST EDGE

Romney got about $13 million in income over the past two years from "carried interest," a form of earnings that is available to private equity partners and taxed at the 15-percent investment income tax rate, not the higher wage income rate.

The "carried interest" provision of the U.S. tax code has repeatedly been targeted for elimination by Democrats who say it is unfair, while the private equity industry defends it. A campaign spokesman said that Romney "has not addressed carried interest specifically in this campaign."

The former governor of Massachusetts released his tax returns after a week when his chief Republican presidential nomination rival, former U.S. House of Representatives Speaker Newt Gingrich, questioned whether Romney was hiding financial information and cast him as out of touch with most Americans.

For 2011, about 46 percent of Americans will pay no federal individual income taxes, most of them because they are poor, according to the Tax Policy Center, a think tank.

Counting all U.S. taxpayers, the average tax rate is 11 percent, according to The Tax Foundation, another think tank.

Effective tax rates vary wildly from person to person due to the maze of deductions, exemptions and credits in the tax code, which has not been thoroughly overhauled in 25 years.

Romney's estimated net worth is $190 million to $250 million. "Governor Romney's investments are reported and taxed in full compliance with U.S. tax laws," said Romney campaign counsel Ben Ginsberg on a conference call with reporters.

NEXT ON GOP FIGHT CARD: FLORIDA

The Republican candidates are fighting for the nomination to face Obama, a Democrat, in the November 6 general election. The next Republican state primary contest will be in Florida on January 31.

Gingrich scored by attacking Romney's finances and upset him in the South Carolina primary on Saturday. The release of Romney's tax returns was meant to blunt Gingrich. But it could further inflame the debate about the tax code and income inequality, as reflected in the Occupy Wall Street protests.

Romney campaign officials said his tax rate is based mostly on blind trust investment income. Returns for three blind trusts were released. The officials said Romney makes no decisions on how money is invested.

They said that Romney's holdings also include amounts in funds based in the Cayman Islands and other overseas entities.

The Cayman holdings and holdings in a Swiss bank account - closed in 2010 after an adviser decided it could be politically embarrassing to Romney - were reported on tax returns and were not vehicles to avoid taxes, the advisers said.

Brad Malt, who oversees the Romney blind trusts, said on the conference call that Romney's wife's trust had a $3 million bank account at UBS AG, the Swiss banking giant. Malt said he closed the bank account in late 2010.

Malt said that "taxes were all fully paid" on the account, but that "it just wasn't worth it; I closed the account."

The tax returns showed Romney and his wife contributed $7 million to charity over the two years covered, much of it going to the Mormon church. That represents more than 15 percent of the Romneys' income for those years.

COUNTDOWN TO CAPITAL GAINS SCRAP

Romney had capital gains income of $12.5 million for 2010 and an estimated $10.7 million for 2011.

The capital gains tax rate was slashed to 15 percent in 2003 under President George W. Bush. President Bill Clinton had cut it to 21 percent from the 28 percent level set under President Ronald Reagan, who raised it to match the tax rate on wages.

The capital gains rate will jump to 20 percent in 2013 if the Bush tax cuts are allowed to expire, an issue that is sure to prompt an intense political fight later this year.

Asked why Romney was not releasing tax records for the years in the 1980s and 1990s in which he made his fortune at Bain, Ginsberg said the two years covered by the tax returns should give a broad picture of Romney's financial situation.

"We're not going to get into the game of once you give them something, they demand more," Ginsberg said. "This is a fulsome release and we're proud of it."

Malt said Romney had not been audited by the Internal Revenue Service in the last 10 years.

FUZZY ANSWERS HURT

The tax issue may have been a factor in Romney's loss to Gingrich in the South Carolina primary last Saturday. It became a distraction to Romney's campaign, and Romney's fuzzy answers on releasing his records aggravated the problem.

First he said he might release them, or might not. When the questions kept coming, he said he would put them out in April, after his 2011 forms were completed. Only after he was defeated in South Carolina did his aides say he would release them this week. Gingrich has released his returns for 2010, but has not released an estimate for last year, as Romney did.

Long considered the front-runner for the 2012 Republican presidential nomination, Romney was staggered by Gingrich's lopsided win in South Carolina, and is looking to regain enough momentum to defeat Gingrich in Florida.

(Additional reporting by Lynnley Browning and Patrick Temple-West; Editing by Kevin Drawbaugh and Eric Walsh)

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Comments (163)
razzmatazz wrote:
“Romney, whose estimated net worth is $190 million to $250 million, is among the wealthiest Americans ever to seek the presidency.”

This is silly – H. Ross Perot was worth BILLIONS when he ran for President in the early 1990s, and that’s in 1990s dollars back when gold was only $300 per troy ounce. Today, Romney has only millions and gold is now almost $2,000 per troy ounce — his dollars don’t buy nearly as much as Perot’s greater dollars did twenty years ago.

Jan 24, 2012 12:21am EST  --  Report as abuse
doggydaddy wrote:
And this multi-millionaire wants to become President so that he can lower his tax rates even further, increasing his personal wealth, while cutting programs that help the Middle Class, the elderly, and the poor, like Pell Grants, Medicare and Medicaid.

He talks about restoring America to greatness, but he is unwilling to spend any money doing it. No Hoover Dams or national highway systems like America built when we WERE great. We could build a national high-speed railway system like in China and Europe, but not under a President Romney, or any Republican President. Romney’s idea of restoring America to greatness is seeing him elected to the Presidency and having him simply declare it, much like Bush’s “Mission Accomplished”. Republicans think that all they have to do is state something and it becomes the reality. They believe that because it so often works with their adherents. There is no global warming. We can restore America’s greatness by cutting taxes to zero. We have the greatest healthcare system in the world. Obama wasn’t born in the US. Saddam Hussein was behind the 9/11 attacks. Republican followers believe these rightwing canards even though they have little or no basis in reality. All it takes is someone in the Republican leadership to state that it is so. Very very troubling.

Romney wants to perpetuate the lunatic notion that corporations are people while sending real people, young people from the poor and Middle Classes, to fight a war in Iran. And as always, he fails to explain how he’d pay for it. In fact, he would repeat one of the most stupid things that George Bush did, he’d cut taxes at a time of war. People, do not vote for a candidate who will cut taxes while going to war. Bush is the first US President to do that and you know how that turned out. Don’t ignore reality just because you find doing so is politically convenient or because FOX News is encouraging it. Do not elect someone to the Presidency who would cut taxes while going to war.

Jan 24, 2012 12:37am EST  --  Report as abuse
sdsavage wrote:
Mr. 0.01 percent?

Jan 24, 2012 12:37am EST  --  Report as abuse
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