Mitt Romney’s campaign sought Friday to dispel some of the mystery surrounding the GOP candidate’s taxes before 2010, the earliest year of tax returns he has released during his presidential run. But experts said questions remain.
The campaign released a letter from PricewaterhouseCoopers, which prepared Romney’s taxes from 1990 to 2009, summarizing two decades’ worth of returns.
The letter said that during every year of this period, Romney and his wife, Ann, paid state and federal income taxes. It also said that the lowest annual effective rate during this period was 13.66 percent. The average was 20.20 percent.
Tax experts said these numbers don’t show the ebb and flow of Romney’s income and tax bill during this period, which included the financial crisis that peaked in 2008.
Daniel Shaviro, a tax professor at the New York University School of Law, said numerous tax strategies can allow wealthy individuals to reduce the amount of income that can be taxed in a given year, especially if there is a severe downturn in the stock market.
For instance, he said, in a year in which someone reports an adjusted gross income of $10 million and paid $1.5 million in taxes, his tax rate would be 15 percent. But it would also be 15 percent if he reported just $100,000 and paid $15,000. The difference would reflect two different approaches to tax sheltering, he said.
“We don’t have a year-by-year breakdown,” Shaviro said. “That’s information they had right at their fingertips. It’s just something he didn’t want to reveal.”
Another question is how changes in the capital gains tax rate affected Romney’s tax bill. During the years summarized by the PWC letter, the capital gains tax rate dropped significantly, from 28 percent from 1992 to 1997 to the current 15 percent. Romney pays a lower tax rate than many high-income earners — who pay 35 percent — because he relies so heavily on capital gains for his income. Thus, his effective tax rate is greatly affected by the capital gains rate dictated by the law.
“If they’d averaged only the last 15 years, his rate would have been much lower,” Rebecca Wilkins, senior counsel for federal tax policy at the Citizens for Tax Justice, said in a statement.
The lower capital gains rate in 2011 alone saved Romney $1.2 million, according to a review by Wilkins.