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Under pressure from rivals, Romney reveals tax returns

Text by News Wires

Latest update : 2012-01-24

Republican presidential candidate Mitt Romney released his US taxes on Tuesday to reveal that he paid an effective tax rate of 13.9% in 2010. Because his income derives mainly from capital gains, he pays a lower rate than many in the top tax bracket.

REUTERS - Republican U.S. presidential candidate Mitt Romney bowed to political pressure and cracked the books on his personal finances on Tuesday, releasing U.S. tax returns showing he pays a lower effective tax rate than many top wage-earners.

Unlike most Americans who get a paycheck, Romney earns the majority of his income from investment profits, dividends and interest. The returns showed he will pay $6.2 million in taxes on $42.5 million in combined 2010 and 2011 income.

Romney, the former governor of Massachusetts, 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 roughly in line with the effective tax rates paid by most Americans, but they are far below the top income tax rate levied against wages, which is 35 percent, because the U.S. tax code favors investment income over wage income.

One of the wealthiest Americans ever to run for the White House, Romney did not release returns from the years when he made his fortune buying and selling companies as a private equity financier with Bain Capital, but the returns that he did release showed Bain gave him a special tax advantage.

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."

Gingrich questioned finances

Romney released the 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 information about his finances and cast him as being 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.

The Republican candidates are fighting for the nomination to face President Barack Obama, a Democrat, in the Nov. 6 election. The next state primary contest is in Florida on Jan. 31.

Gingrich's attacks helped him upset Romney in the South Carolina primary on Saturday. Since then, Romney has fired back with attacks questioning Gingrich's character and judgment.

The release of Romney's tax returns is meant to blunt Gingrich's criticisms, but it could also add to a broad debate about the fairness of the tax code and U.S. income inequality, as reflected in the Occupy Wall Street protests nationwide.

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

Funds in Cayman Islands

They said that Romney's holdings 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 bank 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 in 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.

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

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."

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.
 

Date created : 2012-01-24

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