The Secret is Out: Romney Tax Returns Released

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By Teresa Ambord

The long awaited secret is out. The Romney campaign posted his full 2011 tax return September 21, along with a summary of taxes paid all the way back to 1990. Tax data from the earlier years took the form of a notarized letter from Romney's tax preparer providing a "summary of tax rates from the Romney's tax returns since 1990." The anticipation of these tax returns was strong, demonstrated by the fact that more than 105 individuals in Chicago were on the Romney website watching as the records rolled out, according to Romney spokeswoman Andrea Saul.
 
What had Romney said about his tax returns?
 
During a January primary debate, Romney said he paid "all the taxes that are legally required and not a dollar more." 
 
Later he stated that he had gone back and taken a look at the previous twenty years of tax returns and found that at no time had he ever paid less than 13 percent.
 
In July, as the demand to see how much he'd paid in taxes, he told ABC news that voters expected candidates to pay "only what the tax code requires." And, "I don't think you want someone as the candidate for president who pays more taxes than he owes."
 
What was the opposition saying about Romney's tax returns?
 
Among other things, opponents suggested Romney lacked transparency concerning his income from Bain Capital, the payment of foreign income tax, and the possibility of offshore investments. Perhaps the most vocal critic has been Senate Majority Leader Harry Reid (D-Nev) who claims to have an anonymous informant, a former Bain Capital investor, who said Romney "didn't pay any taxes for ten years."  
 
Now that the returns are out, what do they reveal?
 
For 2011, the Romneys paid $1.94 million in taxes on $13.7 million, mostly investment income. That equals an effective tax rate of 14.1 percent. They also donated to charity more than $4 million, though they took a deduction for $2.25 million. 
 
The data released by the campaign showed that the Romneys did indeed pay state and federal taxes in each of the last twenty years, with the lowest effective annual rate being 13.66 percent, though the actual rate for each year wasn't revealed. The campaign also showed that the average effective federal rate over these twenty years was 20.2 percent, with an average of 13.45 percent given to charity.
 
Why didn't the Romneys take full advantage of the charitable deduction to which they were entitled?
 
Romney trustee Brad Malt explained why: "The Romneys' generous charitable donations in 2011 would have significantly reduced their tax obligation for the year. The Romneys thus limited their deduction of charitable contributions to conform to the governor's statement in August, based on the January estimate of income, that he paid at least 13 percent in income taxes in each of the last ten years."
 
Not taking the full deduction meant that the Romneys paid a quarter million more in federal taxes than they owed. 
 
Will the release of the returns satisfy the political opposition?
 
Not likely. Even as the returns were rolled out, the Obama campaign was ready with more questions. The same day, they circulated a memo demanding to know whether Romney paid foreign income taxes, owned a shell corporation in Bermuda, and continues to receive income from Bain Capital. 
 
Obama spokesman Danny Kanner wrote in the e-mail memo, "How can we believe that Romney paid the rates asserted in the summary when he refuses to release the returns themselves?  If the data used to compile the summary is derived from all of Governor. Romney's tax returns from 1990-2009, why provide average calculations instead of simply providing the voters with the tax returns themselves?" 
 
The Romney Response?
 
In anticipation of continued criticism from opponents, the Romney campaign also issued a statement from former IRS Commissioner Fred Goldberg. Goldberg wrote, "These returns reflect the complexity of our tax laws and the types of investment activity that I would anticipate for persons in their circumstances. There is no indication or suggestion of any tax-motivated or aggressive tax planning activities. In my judgment, they have fully satisfied their responsibilities as taxpayers."
 
What does the law say about forcing the release of tax returns?
 
After Harry Reid's assertion that the Romneys paid no taxes for ten years (per his anonymous source), the Huffington Post reported: "According to Title 26 of US Code Section 6103, the treasury secretary can disclose any personal tax return to the president 'or to such employee or employees of the White House Office as the President may designate.'" 
 
In addition, the law permits that certain members of Congress who submit written requests to Geithner can also access Romeny's earlier returns. Specifically, the Senate Finance Committee, the House Ways and Means Committee, and the Joint Committee on Taxation are among those who can access individual tax returns, said the Huffington Post. "A request by anyone except a tax-writing committee has to be accompanied by a Senate or House resolution," Rebecca Wilkins, senior tax counsel at Citizens for Tax Justice. 
 
In other words, tax returns may be personal and confidential, but with enough political leverage, nothing is sacred.
 
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Question: a reader on one of the political sites asked an interesting question, and I forward it here, for an answer -- why did Romney's accountant release 20 years instead of only the requested 10 years? Romney apparently made his fortune around 2000, and probably paid a higher tax rate before that, and a lesser one afterwards. Can the accountants jiggle the averages and what they're based on so that Romney really may have paid next to nothing for the past 10 years? If the figures are based on at least AGI for each year, then technically the accountant wouldn't be lying and Romney could claim an overall higher tax rate.

Question to you revacoop: Could it be possible that people are just a bit jealous of successful Americans that have made more money than most middle class or lower income class? In the real world where there is more to worry about than Romney s taxes, its obvious that taxes were paid and the more one can write off or deduct the more a person can get away with and its legal. I mean if that's the number one issue with the next possible president then its time to move on.

If Romney paid a higher tax rate before 2000, it was because his income was derived from work, i.e. he earned money from working and received a W-2 for that compensation. The article states that Romney's 2011 taxable income was "$13.7 million, mostly investment income." Investment income is taxed at a lower rate to individuals than earned income. Why is that? Because investment income has already been taxed at 35%, the corporate income tax rate, AND monies that an individual has earned, saved and uses for investment purposes has already been taxed at his individual tax rate for earned income (15% - 35%, depending on how much was earned in the respective tax year). (A lower tax rate for investment income is very logical to me, in fact, I don't think there should be any tax on investment income. If there was a 0% tax on investment income, billions of dollars would be pumped into the economy, which would increase economic growth dramatically.) If you add the corporate tax rate of 35% plus the investment income tax rate of 15%, you arrive at a 50% tax rate on investment income. I imagine that the majority, if not all of Warren Buffet's income is investment income, while his secretary's income is earned income from working (as his secretary). Therefore, Buffet's individual income tax rate is limited due to his source of income - investments. Buffet's secretary's income is taxed as earned income, which is a higher rate, and should be since it is a deduction to his corporation for tax purposes and hasn't been taxed at the corporate rate. If you want to further understand about the whys and wherefores of Federal tax rates, ask a tax professional. The MSM is very misleading in the tax facts of the complex U.S. Tax Code (Title 26). You can't just compare the tax rates between individuals. You have to look at the sources of income that are being taxed to get the true picture.

While I understand, and do not disagree with your point your math is wrong. The deductions are not additional, they are transitional. He would be taxed at 35% and then taxed on the remainder at 15%. For example, if he was taxed 35% of $1 million he would lose $350,000 in corporate tax then from the $650,000 that remained he would be taxed 15% (so $97,500) which would leave him with $552,500. While this is not proportionally much more than 500,000 that would be 50% of his money as you suggested above, it is more overage than I make in a year as an educator. Again, I have no argument with your point about his taxes merely your math as it was listed above. He does not lose 1/2 of his money to taxes.