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Six Facts About Mitt Romney’s Tax Returns

After weeks of refusals and equivocation, Mitt Romney finally released his tax returns last night to a handful of media outlets, showing that he made $21.7 million in 2010 and $20.9 million last year. He only actually released one year of returns, 2010, and his estimated return for 2011, even though many have called on him to follow the precedent set by his father and release many more years of returns.

Nonetheless, there is much to learn from the astonishing 550 pages of returns Romney released:

1. Romney paid a lower tax rate than many middle-class Americans: Romney’s returns reveal that he paid an effective tax rate of 13.9 percent, lower even than the low rate of 15 percent he estimated he paid last week. While this is far less than what many middle-class Americans pay, it’s also well below what wealthy people pay. The average effective tax rate for someone in Romney’s income bracket is 25 percent.

2. Romney makes more in a day than the average American makes in a year, and becomes a 1 percenter every week: As Bloomberg News notes, “In 2008, according to the IRS, the median adjusted gross income was $33,048, which Romney made in less than a day. Reaching the top 1 percent of taxpayers required $380,354 in adjusted gross income, about Romney’s earnings in a week.”

3. Romney paid almost nothing in payroll taxes: Romney contributed just .1 percent of his income to Social Security and Medicare in 2010 via the payroll tax because the tax is only assessed on earned wages, but all of Romney’s income came from investments. Most working Americans pay 7.65 percent.

4. Romney has accounts in countries notorious for tax dodging: By now, it’s well known by now that Romney invests in funds based in the Cayman Islands, but Romney’s returns were “crammed with information about foreign holdings” and reveal that he held accounts in Switzerland and Luxembourg, countries famous for hiding money thanks their low taxes and strict banking secrecy laws. Aides said he closed his Swiss account in 2010 because it might have been “politically embarrassing.”

5. Romney and Gingrich’s tax plans would slash Romney’s taxes: Romney already pays less than many middle class Americans, but under his proposed tax plan, his rates would be slashed in half. Meanwhile, under challenger Newt Gingrich’s plan, Romney would pay almost nothing, since Gingrich has proposed cutting the capital gains tax rate to zero and Romney earns almost all of his money from investments.

6. Romney needs four lawyers, including the former IRS commissioner to defend his tax plan: Romney’s campaign held a conference call with reporters this morning to defend and explain his tax returns, and apparently felt the need to have former IRS Commissioner Fred Goldberg, along with three other top lawyers and his campaign communications director to explain the returns. At one point, the call had to be interrupted so officials could confer with mega accounting firm PricewaterhouseCoopers.

Another small revelation from Romney’s returns is that while Romney said his speaking fees amounted to “not very much” in terms of income, he actually made $111,000 in speaking fees in 2011 and $529,000 in 2010, as Politico’s Ken Vogel points out.

 

By: Alex Seitz-Wald, Think Progress, January 24, 2012

January 25, 2012 Posted by | Election 2012, Taxes | , , , , , , , | 1 Comment

“The Larger Debate Is Just Beginning”: What We’ve Learned From Romney’s Returns

Mitt Romney’s campaign, as promised, released the former governor’s 2010 tax returns, as well as an estimate for his 2011 returns, and we’re starting to get a sense of why the Republican candidate wasn’t eager to share these details.

Mitt Romney offered a partial snapshot of his vast personal fortune late Monday, disclosing income of $21.7 million in 2010 and $20.9 million last year — virtually all of it profits, dividends or interest from investments.

None came from wages, the primary source of income for most Americans. Instead, Romney and his wife, Ann, collected millions in capital gains from a profusion of investments, as well as stock dividends and interest payments.

By any fair estimate, over $42 million in income over two years isn’t bad for a guy who jokes about being “unemployed.” Indeed, Romney would be in the top 1% based solely on the income he makes in one week.

Romney said last week that his rate was “closer to 15%,” but as it turns out, despite his vast wealth, he actually only paid a 13.9% rate last year — lower than his political rivals who aren’t nearly as wealthy, and lower than most middle-class American workers.

And what about those overseas investments?

His 2010 return also showed that he had a financial account in Switzerland that was closed in 2010 and that he generated income from overseas investments. He also reported financial accounts in Bermuda and the Cayman Islands.

A Reuters report added that Romney’s Swiss bank account was closed in 2010 “after an investment adviser decided it could be politically embarrassing to Romney.”

I suspect those with far more expertise in this area will subject these materials to considerable scrutiny, but at first blush, the disclosure appears to raise at least as many questions as it answers.

Why did Romney set up $100 million trust funds for his sons without paying any gift taxes? Were his accounts in the Caymans and in Switzerland created to avoid paying taxes? Was the closing of the Swiss account related to this IRS investigation? And given all of the questions surrounding Romney’s Bain-era work, why does the Republican candidate continue to insist he won’t disclose returns from previous years?

What’s more, following up on a point from last week, even if Romney argues that he’s simply playing by the rules — taking advantage of existing tax loopholes to pay lower rates than much of the middle class — this doesn’t explain why Romney is eager to exacerbate issues on tax fairness with his tax plan that makes the problem worse.

In a debate over tax fairness and income inequality, Romney is practically a case study for What’s Gone Wrong, but he can at least plausibly argue that this is a mess he benefits from, but didn’t create. Romney, however, prefers to believe the problem doesn’t exist.

Greg Sargent did a nice job capturing the larger political context:

I’m not sure the Obama campaign could have scripted this more perfectly. In a remarkable bit of good timing, President Obama is set to deliver a State of the Union speech focused on income inequality and tax unfairness on exactly the same day that Mitt Romney will reveal that he made over $40 million in the last two years — all of it taxed at a lower rate than that paid by middle class taxpayers. […]

Romney doesn’t just disagree with Obama on these fundamental issues; he personally symbolizes virtually the entire 2012 Democratic message. He is the walking embodiment of everything Dems allege is wrong with our system and the ways it’s rigged in favor of the wealthy and against the middle class. Yet this is the standard bearer the GOP seems set to pick.

Romney and his aides believe these materials should end the discussion. That’s backwards — the larger debate is just beginning.

 

By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, Janueary 24, 2012

January 24, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , , , | Leave a comment

Mitt Romney: Goldman Sachs Guy

Mitt says he’s “not a Wall Street guy.” But in one key way, he’s pure Wall Street.

“I am not a Wall Street guy, classically defined,” said Mitt Romney in a December interview with the Huffington Post. Private equity firm Bain Capital, Romney’s longtime employer and the company that made him rich, he seemed to say, was a different breed from JPMorgan Chase, Goldman Sachs, and the other Wall Street financial titans. It was as if he was distancing himself from the unpopular Wall Streeters who helped cause the 2008 economic collapse.

But in one key way, Romney is pure Wall Street. A review of his personal financial disclosure records shows that a chunk of Romney’s wealth—he’s worth an estimated $190 million to $250 million—comes from investments in an array of Wall Street banks and investment houses, none more so than Goldman Sachs.

Romney and his wife, Ann, have investments in nearly three-dozen various Goldman funds together valued at between $17.7 million to $50.5 million, according to a financial disclosure form (PDF) filed in August 2011. Those investments appear in the blind trusts and individual retirement accounts belonging to the Romneys. Romney’s been a loyal Goldman Sachs client. His 2007 disclosure, filed before his first presidential run, showed Goldman investments valued at between $18.2 million and $51.5 million.

No other Republican presidential candidate comes to close to matching the size and breadth of Romney’s investment portfolio. Nor do any of the other candidates’ personal financial disclosures list any investments in Goldman-run funds. Romney’s big bet on Goldman’s financial wizardry could give more ammo to his critics who attack him as a out-of-touch corporate elite who profited by flipping companies and laying off workers, and who has little in common with average Americans. (A Romney spokeswoman did not respond to a request for comment.)

Goldman Sachs is considered by many one of the villains of the 2008 financial crisis. In 2010, Rolling Stone‘s Matt Taibbi acidly described Goldman as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” After a lengthy investigation into the firm’s activities, Sen. Carl Levin (D-Mich.) accused Goldman last year of deceiving its clients by selling them complex investments that the firm’s own traders predicted would fail—a charge Goldman vehemently denied. Levin also accused Goldman brass of misleading Congress about its trading activities, referring the matter to the Justice Department and the Securities and Exchange Commission.

The Goldman investments in Romney’s 2011 disclosure are spread across a variety of portfolios and investment funds. A private, Goldman-managed stock portfolio in Mitt Romney’s blind trust worth between $1,000,001 and $5,000,000 contains stock holdings in 32 companies, including Bank of America, McDonald’s, Staples, and Occidental Petroleum. Another Goldman fund, also worth between $1,000,001 and $5,000,000, invests in (PDF) everything from junk bonds to US Treasuries, derivatives to futures, foreign currencies to the government housing corporation Fannie Mae.

Here’s a list of the Romneys’ most recent Goldman investments:

 

Investment Lowrange Highrange Holder Type
GS Financial Square Federal Fund – FST Shares $5,000,001 $25,000,000 Mitt IRA
GS Private Client Portfolio $1,000,001 $5,000,000 Mitt Blind trust
GS Strategic Income Fund Class 1 $1,000,001 $5,000,000 Mitt Blind trust
Goldman Sachs Small Cap Value Class 1 $500,001 $1,000,000 Mitt Blind trust
GS Financial Square Federal Fund – FST Shares $1,000,000 $1,000,000 Ann Blind trust
The Goldman Sachs Group Inc. Linked to GP GSCI Agriculture, structured note $500,001 $1,000,000 Ann Blind trust
Goldman Sachs Trust GS Inflation Protected Securities Funds – INSTL SHS $1,000,000 $1,000,000 Ann Blind trust
The Goldman Sachs Group Inc. Linked to MSCI EAFE Structured Note $500,001 $1,000,000 Ann Blind trust
GS Local Emerging Mkts Debt FD Mutual Fund $500,001 $1,000,000 Ann Blind trust
GS Strategic Income Fund CL 1 $500,001 $1,000,000 Ann Blind trust
The Goldman Sachs Group Inc Linked to DJIA Structured Note $500,001 $1,000,000 Ann Blind trust
The Goldman Sachs Group Inc Linked to DJIA Structured Note $500,001 $1,000,000 Ann Blind trust
GS 2002 Exchange Place Fund LP $1,000,000 $1,000,000 Ann Blind trust
GS Capital Partners Fund 2000 LP $500,001 $1,000,000 Ann Blind trust
Goldman Sachs Global Opportunities Fund LLC $1,000,000 $1,000,000 Ann Blind trust
Goldman Sachs Hedge Fund Partners LLC $1,000,000 $1,000,000 Ann Blind trust
Goldman Sachs Hedge Fund Partners II LLC $1,000,000 $1,000,000 Ann Blind trust
Goldman Sachs Trust GS Inflation Protected Securities Fund – INSTL SHS $250,001 $500,000 Mitt Blind trust
The Goldman Sachs Group Inc Linked to Russell 2000 Index Structured Note $250,001 $500,000 Ann Blind trust
Cash – GS Account $100,001 $250,000 Ann Blind trust
Cash – GS Account $50,001 $100,000 Mitt Blind trust
GS Emerging Markets Opportunities Fund LLC $50,001 $100,000 Mitt Blind trust
GS Capital Partners III LP $15,001 $50,000 Ann Blind trust
GS Financial Square Federal Fund – FST Shares $1,001 $15,000 Ann IRA
Goldman Sachs Core Fixed-Inc Mutual Fund $1,001 $15,000 Ann IRA
The Goldman Sachs Group CMN (Sold) $0 $1,001 Mitt Blind trust
Goldman Sachs Investment Grade Credit Fund – Inst (Sold) $0 $1,001 Mitt Blind trust
GS Global Equity Partners I, LLC (Sold) $0 $1,001 Mitt Blind trust
Cash – GS Account $0 $1,001 Mitt IRA
Goldman Sachs Ultra-Short Duration Government FD (Sold) $0 $1,001 Mitt IRA
Goldman Sachs Short Duration Government FD (Sold) $0 $1,001 Mitt IRA

 

Here’s a list of Goldman investments in Romney’s 2007 disclosure:

 

Investment Lowrange Highrange Holder Type
Goldman Sachs Financial Square (Sold) $0 $1,001 Mitt Blind trust
Goldman Sachs Institutional LI (Sold) $0 $1,001 Mitt Blind trust
Goldman Sachs Bank Deposit $500,000 $1,000,000 Mitt Blind trust
Goldman Sachs Emerging Equity Fund $1,000,001 $5,000,000 Mitt Blind trust
Goldman Sachs Group, Inc $1,000,001 $5,000,000 Mitt Blind trust
Goldman Sachs Struct Intl Equity Fund $1,000,001 $5,000,000 Mitt Blind trust
GS Global Equity Partners $1,000,001 $5,000,000 Mitt Blind trust
The Goldman Sachs Group Inc 0% 9/25/08 (Sold) $0 $1,001 Mitt Blind trust
The Goldman Sachs Group Inc 0% Due 12/11/2009 (Sold) $0 $1,001 Mitt Blind trust
The Goldman Sachs Group Inc 0% Due 3/25/10 $250,001 $500,000 Mitt Blind trust
GS Emerging Markets Opportunities Fund, LLC $1,000,001 $5,000,000 Mitt Blind trust
Goldman Sachs Global Strategic Energy Fund, LLC $1,000,001 $5,000,000 Mitt Blind trust
Goldman Sachs GTAA Fund, LCC $1,000,001 $5,000,000 Mitt Blind trust
Goldman Sachs Financial Square Federal Fund $1,000,000 $1,000,000 Ann Blind trust
Goldman Sachs Intl Real Estate Secs Fund $1,000,000 $1,000,000 Ann Blind trust
GS 2002 Exchange Place Fund LP $1,000,000 $1,000,000 Ann Blind trust
GS Global Opportunities, LLC $1,000,000 $1,000,000 Ann Blind trust
GS Direct Strategies Fund LLC $1,000,000 $1,000,000 Ann Blind trust
GS Hedge Fund Partners II LLC $1,000,000 $1,000,000 Ann Blind trust
GS Hedge Fund Partners LLC $1,000,000 $1,000,000 Ann Blind trust
GS Quant and Active Direct Strategies Fund, LLC $1,000,000 $1,000,000 Ann Blind trust
GS Capital Partners Fund 2000, LP $1,000,000 $1,000,000 Ann Blind trust
GS Capital Partners III LP $100,101 $250,000 Ann Blind trust
Goldman Sachs Financial Square Federal Fund $1,000,001 $5,000,000 Mitt IRA
Goldman Sachs Emerging Markets Equity Fund $250,001 $500,000 Mitt IRA
GS Structured US Equity Institutional $100,101 $250,000 Mitt IRA
Goldman Sachs Japanese Equity Fund $0 $1,001 Mitt IRA
Goldman Sachs Financial Square Federal Fund $0 $1,001 Ann IRA
Goldman Sachs Core Fixed-Inc I Mutual Fund $1,001 $15,000 Ann IRA

Romney has grappled with accusations in both of his presidential bids that he’s a lifelong member of the wealthy elite who can’t relate to blue-collar Americans. Romney has recently compounded his 1-percent problem by claiming that $374,000 in speaking fees is “not very much,” betting Rick Perry $10,000 during a nationally televised debate, and revealing that he pays roughly 15 percent in taxes. (A typical middle class family pays closer to 25 percent.)

Larry Sabato, director of the University of Virginia’s Center for Politics, says that while Romney isn’t the first very wealthy man to run for president (think John F. Kennedy and Franklin Delano Roosevelt), one of Romney’s basic problems is connecting with middle-class Americans. His many investments in Goldman could shape voters’ opinions of Romney. “The massive Goldman holdings would be another bit of the Romney mosaic,” Sabato says. “It’s another reason why Romney has to find ways to better connect with average people’s problems—because he doesn’t have any of the same problems on his plate.”

 

By: Andy Kroll, Mother Jones, January 23, 2012

January 24, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , , , | 1 Comment

Newt Gingrich Used Gimmick To Avoid Paying Taxes On Millions In Income

Former House Speaker Newt Gingrich (R) caused a stir during last week’s Republican presidential primary debate when he released his 2010 tax return and revealed that he had paid a 31.5 percent tax rate on $3.14 million in income. The release came amid widespread calls for Gingrich’s fellow candidate, former Massachusetts Gov. Mitt Romney (R), to release his own tax returns, after Romney admitted his tax rate was about 15 percent.

But further scrutiny of Gingrich’s own returns from tax experts has revealed that his tax rate should have been even higher. That’s because, according to Forbes, Gingrich dodged “tens of thousands of dollars in Medicare payroll taxes” by classifying most of his income from two companies he owns as profits and dividends, therefore avoiding the payroll tax — a technique the IRS has “consistently and successfully attacked” in the past. Newt and Callista Gingrich classified only $444,327 of their income from Gingrich Holdings and Gingrich Productions as ordinary income. Meanwhile, the other $2.4 million earned was classified as profits or dividends, meaning it was not subject to payroll taxes.

According to tax experts interviewed by Forbes, that means Gingrich is dodging taxes he likely should be paying:

“It appears that he is not paying his fair share of Medicare tax,’’ Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP concluded, in an email to Forbes, after reviewing Gingrich’s 2010 tax return. McKenzie, a past chairman of the Employment Tax Committee of the American Bar Association Tax Section and a member of the IRS’ Advisory Council, added:  “There are a multitude of cases where the IRS has successfully challenged the improper tax strategy of this candidate and his accountants. Service businesses are only allowed to distribute a fair return on investment from an S corp. as profits exempt from Medicare taxes. The remainder of profits must be paid as salary subject to a 2.9% Medicare tax levy.”

As Forbes notes, the IRS has specific rules on how payments from a small business like Gingrich Holdings should be treated for tax purposes, and the amount Gingrich says he invested in his companies — between $500,000 and $1 million — is likely “far too little” to “justify booking $2.4 million as profit.” The ploy, however, is used widely. According to the Government Accountability Office, S corps. like Gingrich Holdings underpaid wages by $24 billion in 2003 and 2004, allowing owners to avoid payroll taxes.

Gingrich’s dodge of Medicare taxes, though, pales in comparison to the tax break he’d give himself should he get to the White House. His tax reform plan calls for a flat 15 percent tax rate, slashing his effective rate to 14.6 percent and giving himself a $540,000 tax break in the process.

By: Travis Waldron, Think Progress, January 23, 2011

January 24, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , , | Leave a comment

Newt Gingrich: “So Busy Serving His Country That He Had To Cheat The Government To Save The Government”

While candidate Gingrich has been busy focusing on the tax return failings of his opponent, Governor Mitt Romney, a report by Forbes’ Janet Novack suggests that, once again, Newt may be using a good offense to keep from having to play some serious defense when it comes to his own failure to pay up on his tax obligations.

According to Novack, “Newt Gingrich avoided tens of thousands of dollars in Medicare payroll taxes in 2010 by using a technique the Internal Revenue Service has consistently and successfully attacked.”

Gingrich’s primary source of income, as revealed on the one tax return he has disclosed, comes from two “S” corporations owned by Newt and his wife, Callista. S Corporations are employed as a means to allow money to ‘flow through’ to the shareholder-owner as if it were a sole proprietorship or partnership, thus avoiding taxation at both the corporate level and re-taxation at the personal level.

It is a perfectly kosher way to do business.

However, according to the law, such corporations are supposed to pay out most of its earnings as direct payments to the owner/shareholder rather than as profits or dividends which are exempted from certain tax obligations— such as the 2.9 percent of earnings which are to be paid to Medicare.

As stated on the IRS website

Reasonable Compensation

S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly.

Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for the service rendered to the corporation.

The key to establishing reasonable compensation is determining what the shareholder-employee did for the S corporation. As such, we need to look to the source of the S corporation’s gross receipts.

The three major sources are:

1. Services of shareholder,

2. Services of non-shareholder employees, or

3. Capital and equipment.

There is little question that the revenues flowing through Gingrich’s companies are the direct result of the services provided by Newt and his wife, whether by way of speaking fees, book royalties, film productions, etc. Thus, it would be reasonable to expect that the preponderance of revenue coming into the Gingrich corporations would pass through directly to Mr. and Mrs. Gingrich and be subject to taxes such as the Medicare tax.

Yet, in 2010, the Gingrich corporations paid out $444, 327 as salary to Newt and Callista while reporting some $2.4 million as profit or dividends – thus allowing the Gingrichs to avoid paying the 2.9 percent Medicare tax on the bulk of their earnings.

Of course, now that Gingrich is running for president, it is unlikely the IRS will come after him as he would simply call it an attack by the Obama administration.

And while there will, no doubt, be an agreement between Romney and Gingrich not to ‘go there’ – as both are now likely to be vulnerable on their respective tax returns—expect Rick Santorum to make a fuss unless he too turns out have some tax issues.

Personally, I can’t wait to hear Newt find a way to blame this on the media.

Or maybe he’ll tell us that he was so busy serving his country that he had to cheat the government in order to save the government.

 

By: Rick Ungar, Contributing Writer, The Policy Page, Forbes, January 23, 2012

January 24, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , , , | 2 Comments

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