The people (okay, mostly Democrats) have been demanding to see Mitt Romney’s taxes, and now Mitt Romney is obliging. Partly. At 3 p.m., Romney is releasing his tax returns for 2011, as well as a notarized summary of his tax returns for the years 1990 to 2009. That’s not quite as much disclosure as his opponents have called for, but it’s a bit more.
Here’s a summary of what’s in Romney’s 2011 tax returns from his trustee, Brad Malt. This section seems to be garnering lots of attention:
* The Romneys donated $4,020,772 to charity in 2011, amounting to nearly 30% of their income.
* The Romneys claimed a deduction for $2.25 million of those charitable contributions.
* The Romneys’ generous charitable donations in 2011 would have significantly reduced their tax obligation for the year. The Romneys thus limited their deduction of charitable contributions to conform to the Governor’s statement in August, based upon the January estimate of income, that he paid at least 13% in income taxes in each of the last 10 years.
Let’s review: In 2011, Romney earned $14 million, mostly from investments that are taxed at a lower, preferential rate. He also gave a very large amount of money to charity—more than $4 million. So, thanks to the charitable deduction in the tax code, he was technically allowed to reduce the amount of income subject to the income tax even further.
The trouble is, if Romney did that, he would have ended up paying less than 13 percent of his income in federal taxes (back-of-the-envelope calculations suggest the amount would have likely been somewhere around 9 to 11 percent). That would have conflicted with his statement in August that he has paid at least 13 percent the past ten years. So Romney opted to limit his charitable deduction to just $2.25 million, essentially agreeing to pay the government more in taxes than he needed to. In the end, Romney had an effective federal tax rate of 14.1 percent.
There’s nothing wrong with voluntarily donating a bit more to reduce the federal deficit. Although there is this awkward quote from Romney during a primary debate in January: “I pay all the taxes that are legally required and not a dollar more,” he said. “I don’t think you want someone as the candidate for president who pays more taxes than he owes.”
Meanwhile, at first glance, it appears that Harry Reid’s infamous source alleging that Romney paid nothing in taxes for 10 years was incorrect—at least for the years 1990 to 2009. According to the notarized summary from PriceWaterhouseCoopers, “Over the entire 20-year period, the lowest annual effective federal personal tax rate [paid by the Romneys] was 13.66%.”
Update: The Romney campaign has clarified its position on paying too much tax in an e-mail to Buzzfeed: “He has been clear that no American need pay more than he or she owes under the law. At the same time, he was in the unique position of having made a commitment to the public that his tax rate would be above 13%. In order to be consistent with that statement, the Romneys limited their deduction of charitable contributions.”