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
“Taxes At The Top”: Low Taxes On The Very Rich Are Indefensible
Call me peculiar, but I’m actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils — partly out of voyeurism, of course, but also because it’s about time that we had this discussion.
The theme of his dance, for those who haven’t been paying attention, is taxes — his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return.
Even then, however, he will face pressure to release previous returns, too — like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).
And the public has a right to see the back years: By 2011, with the campaign looming, Mr. Romney may have rearranged his portfolio to minimize awkward issues like his accounts in the Cayman Islands or his use of the justly reviled “carried interest” tax break.
But the larger question isn’t what Mitt Romney’s tax returns have to say about Mitt Romney; it’s what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden?
For they do. If Mr. Romney is telling the truth about his taxes, he’s actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes — major burdens on middle-class families — this implies that the top 400 filers faced lower taxes than many ordinary workers.
The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains — three-quarters of which go to the top 1 percent of the income distribution — warrant such special treatment.
Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false.
When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasn’t always thus — and the days when the superrich paid much higher taxes weren’t that long ago. Back in 1986, Ronald Reagan — yes, Ronald Reagan — signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clinton’s first term.
Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Children’s Health Insurance Program. And today’s ultralow rates — the lowest since the days of Herbert Hoover — date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq.
Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clinton’s first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut.
So is it essential that the rich receive such a big tax break? There is a theoretical case for according special treatment to capital gains, but there are also theoretical and practical arguments against such special treatment. In particular, the huge gap between taxes on earned income and taxes on unearned income creates a perverse incentive to arrange one’s affairs so as to make income appear in the “right” category.
And the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration.
So Mr. Romney’s tax dance is doing us all a service by highlighting the unwise, unjust and expensive favors being showered on the upper-upper class. At a time when all the self-proclaimed serious people are telling us that the poor and the middle class must suffer in the name of fiscal probity, such low taxes on the very rich are indefensible.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2012
GOP Class Warfare: Make The Middle Class Pay
For viewers of Saturday night’s Republican presidential candidate debate, drawing distinctions between the leading candidates wasn’t hard. We may disagree on whether these men are presidential caliber, but as cartoon caricatures, they’re deliciously unique. Rick Santorum’s sexual obsessions, Rick Perry’s Texas war-mongering, Newt Gingrich’s ego, and Mitt Romney’s profound commitment to flip-flop, any time, anywhere, are all drawn in big, bright, Day-Glo colors. (Ron Paul is, of course, Ron Paul.)
But on one topic they are as alike as genetically modified peas in a pod. In an era in which Americans are paying historically low taxes and the government faces huge budget deficits, they are all fervently determined to give the richest Americans another huge tax break.
The Citizens for Tax Justice have crunched the numbers, and they are remarkable.
The cost of the tax plans proposed by Republican presidential candidates would range from $6.6 trillion to $18 trillion over a decade. The share of tax cuts going to the richest one percent of Americans under these plans would range from over a third to almost half. The average tax cuts received by the richest one percent would be up to 270 times as large as the average tax cut received by middle-income Americans.
The figures are staggering. Here’s a quick breakdown of how the richest one percent of Americans would stand to benefit under the different plans.
- Newt Gingrich: An average tax cut of $391,330
- Rick Perry: An average tax cut of $272,730
- Mitt Romney: An average tax cut of $126,450
- Rick Santorum: An average tax cut of $217,500
Ron Paul’s tax plan isn’t detailed enough to make the same analysis, but he has proposed repealing the federal income tax altogether, which, ideologically speaking, makes him a clear fellow traveler with the rest of his colleagues.
The CTJ report makes a little bit too much of the relative size of the tax cuts enjoyed by the richest Americans compared to the rest of us (for example, under Gingrich’s plan the middle fifth of Americans would get a $1,990 tax cut, a mere pittance compared to the $391,300 delivered to the rich.) In a proportional system, the numbers are always going to be much bigger for the richest Americans, whether we’re measuring hikes or cuts. But the report is right on the money when it points out who ends up really paying for the cuts. Affording the huge tax cuts plans proposed by the leading Republican presidential contenders will require massive cuts to government programs that primarily benefit the lower and middle classes.
Even the meager tax cuts that would go to low-income and middle-income taxpayers under these plans would almost surely be offset by the huge cuts in public services that would become necessary as a result.
GOP lawmakers in Washington are already calling for ending Medicare as guaranteed health insurance for seniors and reducing Social Security benefits, and these tax plans would make necessary even more draconian reductions in the types of public services that middle-income Americans depend on.
Rich Santorum told debate watchers Saturday night that he’d prefer it we just abolished the term “middle class” from the popular lexicon. Dividing up Americans according to their income levels just serves Obama’s “class warfare” agenda, claimed Santorum.
But it’s impossible to look at the tax plans proposed by Gingrich, Romney, et al. and not understand how class warfare really works in the United States today. The rich get a huge windfall — and the rest of us are supposed to pay for it.
By: Andrew Leonard, Salon, January 9, 2012
What’s The Deal With Mitt Romney’s Taxes?
So what’s the deal with Romney’s tax returns? Or more specifically, what’s the deal with Mitt Romney letting himself get more and more nippy press by refusing to release his tax returns when virtually every serious presidential candidate of the last 40 years has done it? Allow me to explain.
We already know Mitt Romney is a really, really wealthy guy. But there have been a lot of rich presidential candidates. And, though he was born to wealth, Romney also made a lot of money himself. He’s also said he’ll release information about his wealth, his assets … a lot of stuff. But just not the tax returns.
So what’s the deal? It’s pretty simple. We might say that a specter is haunting Mitt Romney — the specter of the Buffett Rule.
That’s right, we haven’t heard a lot about the so-called Buffett Rule in a while but it’s the concept pushed by kabillionaire Warren Buffett and embraced by Democrats and particularly the White House, which says that the superwealthy should not pay lower tax rates than your average secretary or auto mechanic or office manager or anybody else who gets by on a salary.
It’s a very resonant concept. It makes intuitive sense to people. Overwhelmingly the public supports the idea. And it’s very easy to understand.
This is Romney’s problem. While we don’t know the specifics of Romney’s tax returns, we know enough about his finances and sources of incomes to know that he is likely the poster-boy for the Buffett Rule. As Romney likes to say, he’s unemployed. He doesn’t draw a salary. But he seems to still be making big big money off capital gains which are currently taxed at a very low rate. He doesn’t seem to have drawn a salary at any time recently. So he likely pays no payroll taxes. And that’s before you get into legal but aggressive tax-sheltering. It seems virtually impossible that Mitt Romney doesn’t pay the sort of effective tax rate that would make people’s eyes pop when compared to middle income and even relatively wealthy (by normal standards) people who pay considerably higher rates.
That might cause a little problem in any election year. But issues of income inequality and particularly tax policy are right at the top of the political agenda in 2012. And that dictates keeping those tax returns under wraps as long as possible.
By: Josh Marshall, Talking Points Memo, December 30, 2011
Mitt Romney Still Making Millions From Lucrative Bain Capital Retirement Deal, Pays Little Taxes
2012 GOP presidential hopeful Mitt Romney has been banking on his time running the private equity firm Bain Capital to be a major selling point for his campaign. “I spent my career in the private sector. I think that’s what the country needs right now,” Romney says.
Romney has had to contend with the fact that Bain made a lot of its money buying up companies, then laying off workers and reneging on benefits to gut those companies, burying them with debt as Bain walked away with millions. In fact, one of his former business partners has explicitly said, “I never thought of what I did for a living as job creation.” And as it turns out, even after Romney left the firm, he was profiting from Bain’s activities due to a lucrative retirement deal:
In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain’s profits ever since, bringing the Romney family millions of dollars in income each year and bolstering the fortune that has helped finance Mr. Romney’s political aspirations.
The arrangement allowed Mr. Romney to pursue his career in public life while enjoying much of the financial upside of being a Bain partner as the company grew into a global investing behemoth.
Since Romney left, Bain has made its money gutting companies like KB Toys and Clearchannel, laying off thousands of workers and leaving the companies under heavy debt loads, while Romney has reaped the benefit. Adding insult to injury, the money Romney has been collecting from Bain is likely not taxed as normal income but as “carried interest,” meaning it is subject to the capital gains tax rate of 15 percent rather than the top income tax rate of 35 percent:
[S]ince Mr. Romney’s payouts from Bain have come partly from the firm’s share of profits on its customers’ investments, that income probably qualifies for the 15 percent tax rate reserved for capital gains, rather than the 35 percent that wealthy taxpayers pay on ordinary income. The Internal Revenue Service allows investment managers to pay the lower rate on the share of profits, known in the industry as “carried interest,” that they receive for running funds for investors.
Because Romney’s income is almost exclusively derived from what are qualified as investments (he recently said he has no income that qualifies for the personal income tax), he is able to drive his tax rate to absurdly low levels for someone making as much as he does. Citizens for Tax Justice estimated that Romney pays about a 14 percent tax rate, below the level at which many middle-class families are paying. And he’s paying that low rate on money made via dismantling companies and eliminating jobs.
By: Pat Garofalo, Think Progress, December 19, 2011
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