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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  • rate this
    +3

    Comment number 405.

    If I invest money into stock market the profit is taxed at 15%. If I invest money into myself (e.g. an education) my profit (higher wages) is taxed at 30%. That just seems very strange. Why are they just considered Income? Why are they differentiated?

  • rate this
    -2

    Comment number 404.

    I think I must be naive but I find this microscopic examination of Candidates' Tax Returns rather distasteful

    I know they are standing for 'high office' but it's like a pack of wolves tearing at a carcass

    There seems to an assumption that only the rich 'get up to something'

    I wonder how we would react if the next President (or Prime Minister) suggested following the Finnish practice?

  • rate this
    +2

    Comment number 403.

    @401
    *****
    I will remember when I have this kind of money to distribute to others, then right it off. Not only that...the approval of you.

    Come on - you can if you try ...think outside of the box.

  • rate this
    -1

    Comment number 402.

    It may be worth wonderinh, of all of these politicians (both sides) as well as business leaders, all supposedly educated and experienced the Nth degree. But the usual responses to financial crisis are either lay people off (make them redundant) or raise taxes, or both. With all those Masters' Degrees and PhD's they should be able to come up with something more imaginative and less destructive.

  • rate this
    -4

    Comment number 401.

    Lots of jealousy in these comments.The man gave 7 million bucks to charity. Blame the tax system,not him,for the amount he was due to pay.

  • rate this
    0

    Comment number 400.

    I was extremely happy to see that Romney paid $3 million in income taxes and gave another $3 million to charity. I could only hope to contibute that much to society in many lifetimes! How wonderfull! The real truth is..we would all LIKE to achieve that level of success. >>>Oh the income envy out there.

  • rate this
    +1

    Comment number 399.

    A good part of the money received was "carried interest", really income in capital gain's clothing. A sort of welfare for the rich, or reverse Robin Hood thing. Flat tax with NO deductions, and some protections against fiddling in returns might do it. The sort of tax law that Pennsylvania had back in the 60s and 70s.

  • rate this
    0

    Comment number 398.

    All this chatter is adistraction from the fact that the name of the game for GOP nominee is who has the most delegates. Gingrich and Santorum aren't even eligible for upwards of 500 delegates because their names won't appear on the ballots in a handful of states. This race will be between Paul and Romney. Do your research and be ready to make an informed choice. Ron Paul 2012!

  • rate this
    0

    Comment number 397.

    What about the "charitable donations" sections? These "charitable donations" are usually huge sums of money handed to religious nuts. Why should that be tax deductable?? We now have problems where these relegious nuts are fighting to have pseudoscience thought in our science classes. I think we need stricter guidelines as to what classifies as "charitable".

  • rate this
    0

    Comment number 396.

    I don't care what they paid in taxes or what they may pay in taxes. I'm more concerned about the bs they spew with the help of the press. Are they right for the job - I doubt it. Most of us feel politicians are stupid (and thats being kind).

    What will happen in the USA is anyones guess. Look at what they did to their own citizens. Its a mess! A damn shame but then again they aren't smart.

  • rate this
    +1

    Comment number 395.

    The real scandal is that US tax law treats "carried interest" as an investment. It's not. Investors pay money into a fund (i.e. they risk their own money). The fund manager (Mitt) gets a share of the profits (called carried interest) DESPITE having none of his own money at risk. Treating carried interest as an investment return means he pays 15% tax. It should be 35%, as with any other cash bonus.

  • rate this
    +2

    Comment number 394.

    One must wonder WHY unearned income is taxed at a lower rate than earned. It already has major advantages, because stocks and bonds are tangible assets, which can be bought and sold. They do not get sick or old, unlike labor, and they don't require working hard every day. All they require is a lot of money. Unearned income should be taxed at a HIGHER rate than the product of our sweat and toil.

  • rate this
    -3

    Comment number 393.

    Just think what a flat tax, instead of "Social Engineering" tax rates by Congress would do to take the wind out of this dialog. Just think of how much Congress and the Presidency would change if the original US Constitution was followed and only taxpayers had the power to vote. One man one vote has a bunch of none taxpaying freeloaders voting for elitist career politicos. Failure is for sure,

  • rate this
    -1

    Comment number 392.

    Mitt Romney owns a corporation(s) with $32m (million) in profits before tax, that then pays $11.1m in corporate tax which is then left with $20.9m in net after-tax profits to pay dividends. Then, Romney received that $20.9m in dividends only to pay another $3m in personal income taxes. Total tax bill $14.1 million on $32 million in profits equals 44% taxation. Not enough you say? How Foolish!

  • 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
    +4

    Comment number 390.

    If he could stand with a manifesto offering a smilar income to all the voters, that'd be a neat trick!

    Let's take it further. Let's, for example, take our Prime Minister's income and by subsidies/benefits for lower earners and higher taxes for the highest earners, arrange for everyone to match his income.

    It all seems a good idea to me!

  • rate this
    +5

    Comment number 389.

    I wonder if Romney is like Jon Corzine. A man who made his money at GS,become a governor of new jersey before having a hand in bankrupting MF Global and losing a huge amount of clients money.
    378. Very true.It's called private equity and hedge funds.Hedge Funds are investing in commodities to make money for the rich,hence why everything from food to oil is rising.Speculation is self perpetuating.

  • rate this
    0

    Comment number 388.

    Not a Romney fan but this article is factually inaccurate. Romney had no income in the 2 years for which he posted his returns. He paid capital gains on monies made from investments.

  • rate this
    +9

    Comment number 387.

    What people fail to realize with this perpetual system of inequality is that the Tax breaks and tax code that allow Mr Romney and others of his wealth to pay as little as they do, are authored by the rich, for the rich. It may be legal what he is doing, but then again so was owning slaves and servants as chattel.
    The tax laws will always favor the Rich as long as rich people are in control.

  • rate this
    +5

    Comment number 386.

    It is hard to make the argument "I only pay the taxes I am legally required" when you're a legislator.

 

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