Mitt Romney to release tax returns, estimates rate at about 15 percent
FLORENCE, S.C. — Bowing to pressure from his Republican rivals as well as the Democrats, Mitt Romney told reporters here Tuesday that he plans to release his federal income tax returns this spring and estimated his rate at about 15 percent.
“What’s the effective rate I’ve been paying? It’s probably closer to the 15 percent rate than anything,” Romney, a GOP presidential candidate, said. “My last 10 years, I’ve — my income comes overwhelmingly from investments made in the past rather than ordinary income or rather than earned annual income. I got a little bit of income from my book, but I gave that all away. And then I get speaker’s fees from time to time, but not very much.”
Romney’s 15 percent rate is likely to draw fire from opponents because it highlights the tax advantages enjoyed by wealthy Americans who make most of their money from investments rather than labor — a disparity that has been criticized by billionaire Warren Buffett and many Occupy Wall Street protesters.
A report by the nonpartisan Congressional Research Service recently showed that investment income, of the kind Romney is citing, was the biggest contributor to an increase in income inequality between 1996 and 2006.
Most Americans earn their income from wages and salaries, paying higher tax rates — up to 35 percent — the more they earn. The tax on capital gains, which include profits from the sale of stocks, bonds and real estate, is 15 percent.
The wealthy take advantage of this lower rate far more than other Americans. In the last 20 years, about half of all capital gains income realized have gone to the wealthiest 0.1 percent.
Romney’s tax returns could also reignite a debate over how to count income earned by partners at private equity firms. When private equity firms sell long-run investments, those profits are treated as long-term capital gains, which means they’re taxed at no more than 15 percent. Critics say those earnings should be taxed as ordinary income because the partners are mostly managing other people’s money, not their own.
Romney collected more than $360,000 in speaking fees from such companies as Barclay’s Bank and Goldentree Asset Management over a 12-month period ending last year, according to his financial disclosure filing.
Romney, who until now had resisted releasing his returns, acknowledged the political pressure on him to do so now. He said he would wait until he files his 2011 returns in April to release them.
“I know that if I’m the nominee, people will want to see the most recent year,” Romney said, adding: “Rather than sort of have multiple releases of tax returns, why — we’ll wait until the tax returns for the most recent year are completed [in April], then release them.”
In Monday night’s debate, Texas Gov. Rick Perry demanded that Romney release his returns, noting that he already had and that former House speaker Newt Gingrich planned to release his later this week. Romney bristled at the suggestion and, when pressed later by one of the debate moderators, offered an unusually stammering response and no commitment to release them.
Romney, a businessman who founded and led the private equity firm Bain Capital, estimated his net worth at between $190 million and $250 million in a public filing last summer. At various points in the campaign, Romney’s rivals have tried to use his personal wealth against him.
During the news conference following a campaign event here, Romney criticized Gingrich’s tax proposal to eliminate capital gains taxes on all individuals. Romney argued that eliminating taxes on investment income would mean that some of the nation’s wealthiest citizens would pay nothing in federal income taxes.
“Warren Buffet, Bill Gates would probably pay no taxes at all,” Romney told reporters. “Today they probably pay 15 percent. Very high-income people of this country pay roughly 15 percent of taxes if their resources are coming from investments and under their plan it would go to zero. I just don’t think that’s the right course.”
Romney did not specify whether he would be among those wealthy investors paying zero taxes under Gingrich’s plan. Romney touted his own plan, which would eliminate capital gains taxes only for those making $200,000 or less.
“I just don’t think that’s the right course. I think that with our precious dollars we should focus on providing relief – tax relief – really in two areas: one is for middle-income Americans that have been hurt the most and secondly is to bring our corporate tax rates to a level where we could draw people from other countries to bring their funds into this country.”