A lower rate
Because the bulk of Romney’s income flows from investment profits, it is taxed at a flat 15 percent rate, far below the highest rates on ordinary wages.
Read the full text of Mitt Romney's tax documents.
Tales of the 1040s
His 2010 returns show that he made $12.6 million in capital gains, $4.9 million in ordinary dividends and $3.3 million in taxable interest.
Romney’s overall tax rate is in line with that of the average American taxpayer. However, it has drawn fire because the federal tax system is designed to be progressive — the more you earn, the more you are supposed to pay.
Romney’s tax documents are voluminous and extraordinarily complex, and his opponents are sure to comb through them in the coming days. They reflect the far-flung finances of one of the richest men ever to run for president. His 2010 tax return alone runs to 203 pages, crammed with information about foreign holdings, contributions to family trusts — and even a Swiss bank account.
In a conference call with reporters, Brad Malt, Romney’s trustee, called the Swiss account “fully legal, fully disclosed” but said it was closed in early 2010. He added: “The income earned on that account is taxed just as any other domestic or other bank account owned by the blind trust.”
Pages and pages are devoted to foreign entities in which Romney is invested. Many are located in places like Luxembourg, Ireland and the Cayman Islands, all famous tax havens. None shows much income.
“These entities are not evading one dime of taxes,” Malt said.
Monday’s disclosure marked the first time the former Massachusetts governor has released his personal tax returns. Though Romney has relied on his wealth to finance his political career, he did not disclose his tax returns in his three prior campaigns — not even in the 1994 Senate race, when he blasted Sen. Edward M. Kennedy (D-Mass.) for failing to release his own taxes.
This time, Romney had hoped to keep the details of his finances under wraps until he won his party’s nomination. But over the past week, as even his Republican rivals raised questions about whether he had something to hide, he concluded that the political cost of secrecy had grown too great.
The release of his taxes is unlikely to satisfy Democrats, who said they will continue to push for more transparency — particularly if Republicans select Romney to face Obama in November. Democratic strategist Paul Begala called on Romney to release 12 years of returns — just as his father did when he ran for president in 1968.
“If you release one year, you can pretty it up,” Begala said. “He’s got to go back a dozen years and really show us — or a lot of fair-minded people are going to conclude that he probably skated with paying less, or maybe even zero, for some of those years.”
Placating his rivals?
It was unclear whether Romney’s disclosure would achieve the more immediate goal of silencing his GOP rivals as they barrel toward a critical showdown next week in Florida. Polls show him trailing Gingrich, who suggested Sunday on C-SPAN’s “Washington Journal” that he was ready to let the tax matter drop.
“As far as I’m concerned, that issue is behind us,” Gingrich said.
Among the details that may spur fresh debate: The returns show that Romney was able to cut his taxable income by $4.8 million because of losses carried over from previous years. Under the tax code, taxpayers who lose money from their investments can deduct those losses against their capital gains. If a taxpayer ends up losing so much that the losses outweigh the gains in a given year, the rest of those losses can be carried to the next year and subtracted from income.
The returns confirm, however, that Romney continues to benefit from his association with Bain Capital, the private-equity firm he founded in 1984 and left in 1999. His earnings through Bain have drawn controversy because they are treated as capital gains rather than wages and thus benefit from being taxed at the lower rate of 15 percent.
Critics say such income, known as “carried interest,” should not be counted as investment earnings because private-equity partners are mostly relying on the money of others rather than their own. The returns show that Romney earned more than $13 million in “carried interest” over the past two years.
Complicated as they are, the tax returns provide only a partial picture of Romney’s wealth. They don’t show the full extent of his net assets, which are estimated to be worth between $190 million and $250 million. Romney has an individual retirement account worth between $20.7 million and $101.6 million, according to his 2011 financial disclosure. He also has a blind trust for his wife, Ann, containing $10 million.
Columnist Allan Sloan contributed to this article.
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