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
    -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
    +1

    Comment number 384.

    382
    You don't have halls. Each ward should produce a mag distributed to all free of charge with one page for each potential MP. And arrange free meetings so all can express their views.The current political parties want free funding to suit their own needs and have looked at criteria as being the number of mps in parliament, not exactly going to create new indepedent MPs but will keep out others.

  • rate this
    -3

    Comment number 383.

    All this shows is that we have a flawed tax system. Mitt Romney may be paying a lower tax rate than I do, but that money pays for things we all use. On the other hand, I get a tax refund that covers almost 100% of the taxes I would have paid anyway. The fact that he is being attacked by other republicans for being wealthy and charitable is despicable. Why is it bad to live the American dream?

  • rate this
    +3

    Comment number 382.

    373.JasonEssex - "..I would prefer all advertising and propoganda (because thats what it is) to be banned and make parties talk to the electorate to get votes"

    Even if you ban all leaflets, posters etc, there is still a lot of expense

    Hiring of Halls, use of Petrol especially in rural areas etc

    Small parties at a disadvantage, hence the discussion on Govt 'grants' for Election Campaigns

  • rate this
    0

    Comment number 381.

    @370.Hexicka "What I give to charity - both money and time/work - is charity, I cannot deduct it."

    Everyone can deduct up to 50% of their income off income no matter how much you earn, unless your benefits are greater than your income. If you choose not to deduct it due to the way you file your taxes then that's up to you.

  • rate this
    -2

    Comment number 380.

    351. Brian M

    Are those people who say Romney "has worked hard" for the wealth he has serious?

    ***
    Romney has worked more smartly.

    He's been growing his wealth while Obama's been...writing books? Compare Romney to Obama, who doesn't have comparable talents.

  • rate this
    +5

    Comment number 379.

    @372 mscracker

    I have always enjoyed your comments - always so sweet.

    If you can't see what the rest of us do, that red tape is stacked against the common person, I guess you will remain ' just sweet'.Not that that is such a bad thing but you do have a vote and that is another (thing).

    Our Fathers have worked all their lives being honest & trustworthy and did so without a portfolio of mega mil.

  • rate this
    +6

    Comment number 378.

    I'm very confused by those of you who think that investments automatically lead to job creation. The trend these days is that investments lead to asset stripping and the dismantling of pension funds. Obviously investments vary a lot but it is very naive to make such assumptions about job creation, especially about a man who has made his wealth outsourcing jobs OUT of America.

  • rate this
    +3

    Comment number 377.

    374
    And how many contacts did he make and then go on to make more money out of office? How much did he make for "friends" whilst in office? Tony Blair has made millions from being the PM, I do not that is from natural ability.Vast amount of money is spent on lobbying, it should be banned. Without the oil industry lobbying we probably would a viable alternative now.

  • rate this
    +5

    Comment number 376.

    @372. mscracker:

    You're missing the point--The wealthy can use these massive donations as deductions and avoid paying taxes to the state and federal governments. That way they can control who gets their money--for example, giving to their church, thus hurting government budget. I spoke with tax experts the year I donated 1/2 my income for charity work--they agree it's a loophole for the rich.

  • rate this
    +6

    Comment number 375.

    ...anyone still under any illusions why American politicians are invariably the frontmen to big business at the expense of people and the rest of the World?

  • rate this
    +1

    Comment number 374.

    BBC presents the comparable income data deceptively. It compares Romney and Gingrich's incomes while out of office to previous Republican presidents WHILE in office BUT it excludes their presidential salary. Presidents, like many US public officials, take pay cuts while in office. Bush II made substantially more money at times in the private sector for example when he OWNED a baseball team.

  • rate this
    +2

    Comment number 373.

    365 sussana
    And sadly that's why a lot of western society is rotten. Those who have wealth can buy wealth to increase it. There has been talk in the UK about the tax payers supporting political parties and their election campaigns. I would prefer all advertising and propoganda (because thats what it is) to be banned and make parties talk to the electorate to get votes.

  • rate this
    0

    Comment number 372.

    @363.Vision Holder :
    Lower income families with kids generally get tax refunds at the end of the year & don't need a tax write off for donations to charity.

  • rate this
    +3

    Comment number 371.

    364.JasonEssex - "And some people would like us to get away from the monarchy and introduce a president and have us go through this farce of a system where money talks...."


    Whether the same would apply under a Presidential system I don't know but Parliamentary Campaign Expenditure is limited by Law in the UK

    I don't know of it is limited for Congress Elections in the USA

  • rate this
    +1

    Comment number 370.

    Charity starts AFTER taxes are paid. Before taxes it should be called a tax deduction. Charity is great business in USA. As a small business owner/self-employed, I'll pay my 36%, every penny of it. What I give to charity - both money and time/work - is charity, I cannot deduct it. No vacation, no retirement, no health care, no free higher education. Isn't this country great?

  • rate this
    +2

    Comment number 369.

    OMG I've just had another revelation. I know, I know its silly but here goes anyway - why do we need anyone to 'lead' us? They have, with voters help, led us to this point. Ask yourself "where the hell are we?"

    See you at the pub!

  • rate this
    +1

    Comment number 368.

    Presumably, these financial wizards (if one of them is elected) will fix the global financial crisis and all debts will be history.....

    ... and presumably we'll all only have to pay 14% in taxes once they've sorted everything out.

    Somehow, I have my doubts.

  • rate this
    +1

    Comment number 367.

    There are so many smart people here!
    How can the American Voter protest with their vote.
    Vote out the old congress & vote in the new = inexperience
    which may well be better than being sold out.

    THE ONLY WAY TO CHANGE IT IS TO GET MONEY OUT OF POLITICS.

    If there is no way to buy a tax break, there is no special tax break

  • rate this
    0

    Comment number 366.

    362 Philip Alan
    And that's why people invest in hedge funds and private equity as they can avoid a higher rate of tax. Companies are better off taking on a higher level of debt (and therefore avoiding corporation tax) then issuing equity. Sadly most government advisors on finance work for GS and look after themselves or their industry.

 

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