Wealthy Romney reveals 14% taxes

 

Mitt Romney and Newt Gingrich tussled over integrity on Monday night's NBC debate in Florida

US Republican presidential candidate Mitt Romney expects to pay about $6.2m (£4m) in taxes on income of $42.5m in the last two years.

That makes for a tax rate of 13.9% in 2010 and an expected rate of 15.4% in 2011, his campaign said.

His income places him among the top earners in the US, and his tax history has become a campaign issue.

Mr Romney was an early favourite in state primaries but lost the latest, in South Carolina, to rival Newt Gingrich.

Mr Gingrich released his tax figures on Saturday, saying he paid nearly $1m last year, a rate of about 31%.

On the same day he won a striking victory in the South Carolina vote, beating Mr Romney with more 40% of the vote.

President Barack Obama is expected to highlight economic inequality in his annual State of the Union address later on Tuesday.

'Not a dollar more'

Mr Romney is a multi-millionaire businessman and former Massachusetts governor with three homes.

He lives mainly on income derived from his investments, for which only 15% tax is payable. Earned income is taxed at up to 35%.

The reason Mr Romney pays a lower rate than say President Obama (26%) or Newt Gingrich (over 30%) is because there's a different tax rate for income and investments.

That raises a much wider argument, and one that will be central to the election in November. It is precisely why the billionaire investor Warren Buffet said the tax rate was unfair and should be changed because he paid a smaller proportion of his income than his secretary.

Mr Obama has taken up that call with enthusiasm, even naming his proposed rule after Mr Buffet.

It plays in to a national debate on wealth and fairness that could be critical to Mr Obama's re-election or defeat. The president will make the idea of a fairer society, where the rich do more to help the struggling middle classes, a centrepiece of his state of the union speech tonight.

On Monday, before he released his income and tax figures, Mr Romney defended his tax record at a Republican presidential debate in Florida.

"I pay all the taxes that are legally required and not a dollar more. I don't think you want someone as the candidate for president who pays more taxes than he owes," Mr Romney said.

On Tuesday, Mr Romney's campaign released his 2010 tax papers and estimates for his 2011 taxes, for which he has not yet filed a return.

He and his wife Ann reported income of $21.6m in 2010 and $20.9m last year, almost all it from investments. There were no declared wages on the 2011 estimate.

They gave $7m to charity in the same period, about half of it to the Mormon Church.

President Barack Obama and his wife Michelle released their 2010 tax return in April last year, showing an income of $1.7m. They paid about $450,000 in federal tax, a rate of about 26%.

Tax debate

Mr Romney had promised to release the figures, saying the question of tax had become a distraction for his campaign, and he wanted to re-focus on the main issues.

However, he had initially refused to release the returns, saying the financial disclosure reports that all federal candidates must provide should be enough.

But the reluctance allowed his Republican rivals and Democratic critics to focus on his record at private equity firm Bain capital, painting him as a wealthy businessman who cut jobs and shut down firms.

Mr Romney's supporters have leapt to his defence, equating attacks on his business practices with criticism of American capitalism itself.

Republican candidates' taxes

  • Mitt Romney (2010). Income $21.6m. Tax paid $3m. Donated to charity $3m.
  • Newt Gingrich (2010). Income $3.1m. Tax paid $0.99m. Donated to charity $81,000.

Source: Washington Post

But the issue has reignited the debate in the US over how investment income - in particular carried interest, the profits that private equity managers make - is taxed.

President Obama has said such income should be taxed at a higher rate, and that wealthy Americans and corporations should pay more tax to help trim the country's deficit.

Republicans are opposed to any tax hikes, saying they would harm the economy.

Gingrich surge

Mr Romney had led the Republican field since November and appeared to have won the first two contests of the campaign, in Iowa and New Hampshire.

But the Iowa caucus result was overturned in a recount which gave a narrow victory to Rick Santorum.

Media reaction

For the Washington Post, the storm that blew up over Mitt Romney's tax returns is a spectacular example of campaign mismanagement, fraught with "political danger" write Chris Cilizza and Aaron Blake.

That storm is not over yet, many commentators predict. "There are certain to be more nuggets of interest revealed - like the fact that he had a Swiss bank account that was closed in 2010," says Dashiell Bennett in the Atlantic Wire.

And that continuing debate does not bode well for Romney, Paul Blumenthal in the Huffington Post agrees. "It isn't as though Romney is the first very wealthy man to run for president, but he has a way of highlighting his wealth in a way that brings to mind the famous quip by the former Texas Gov Ann Richards about President George HW Bush: 'He was born with a silver foot in his mouth.'"

For Bloomberg's David J Lynch and Steven Sloan, the issue has ignited a debate over the fairness of "so-called carried interest provision, which provides a relative handful of investment executives with preferential tax rates".

They expect the Democrats to seize on the issue, perhaps as soon as President Obama's State of the Union address on Tuesday, which is expected to revolve around a theme of "economic fairness".

Mr Gingrich, who polled poorly in both Iowa and New Hampshire, won a convincing victory over Mr Romney in South Carolina after attacking Mr Romney over his business and tax records.

Mr Romney has called on Mr Gingrich to release documents related to his involvement with mortgage giant Freddie Mac.

Freddie Mac, a federally backed mortgage guarantor, required millions in government aid after in 2008 financial crisis.

In latest debate, Mr Romney said Mr Gingrich was doing business with Washington's "chief lobbyists".

Mr Gingrich said he served as a historian and consultant for the company, not a lobbyist.

Earlier on Monday, Mr Gingrich released his 2006 contract with Freddie Mac, but the document did not cover most of his multiple-year working relationship with the company.

The candidates are now campaigning in Florida, which holds its primary on 31 January. The state is seen as a major battleground in the US general election, with a diverse electorate and and a cash-hungry advertising market.

Primaries and caucuses will be held in every US state over the next few months to pick a Republican nominee to take on Democratic President Barack Obama in November.

The eventual winner will be anointed at the party convention in August.

Presidents' incomes comparison
 

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US Presidential Election 2012

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  • rate this
    +12

    Comment number 391.

    Something wrong when a guy on this type of income pays considerably less than a ordinary Joe on the street (percentage wise).It just shows how the wealthy with access to smart accountants and lawyers can play the game, while the ordinary guy in the street gets screwed over.
    The ironic thing is how the rich guy needs the ordinary guy to vote for him to get him in to office.

  • rate this
    -10

    Comment number 385.

    Romney's investments came from being able to save his honestly worked for earnings. He now has enough investments to live off the income which is taxed at 15%. I can't see where the problem lies. He also reduces his tax by giving $7m to charities am I missing something here. What he's got he worked for,. Isn't this the American dream? He has shown integrity and fidelity is that a problem?

  • rate this
    +47

    Comment number 298.

    Mitt Romney misses the point entirely. It's not about him paying low taxes, it's that it highlights the issues of a system that promotes increasing income disparity. Normal people get taxed about 1/3 of their income,which for them means they can't afford a car, or rent. Romney makes millions, yet pays half the rate, when for him 1/3 taken away means he can still buy every house on my street.

  • rate this
    -31

    Comment number 251.

    I have no problem with anyone legally reducing their tax rate from 35% to 15% with a 7 million dollar donation to charity! Go Romney! In fact this gives me greater admiration for a candidate I barely knew. Taxpayers who contribute to charities are rewarded with lower effective tax-rates as they give more. Add Romney's charitable contributions and taxes paid and his "real tax-rate" is MUCH higher!

  • rate this
    -21

    Comment number 233.

    Its so easy to forget what we stand for. Mitt Romney is a typical example of American values. He worked hard to make his money and instead of locking his $250 million in a safe somewhere in his home, he put that money to work by investing it in right places to create jobs and earn him some profit. The fact that he earned $42 million profit shows how many jobs his investments have created.

 

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