Mitt Romney, trying to put to rest questions about his taxes, disclosed this morning he and his wife earned more than $42 million over the past two years, and expects to pay about 15 percent of his income this year after paying about 14 percent in 2010.
In both years, Romney, pre-paid more taxes than he owed and received a $1.6 million refund in 2010 and expects to receive about $200,000, which he applied to help pay the following year’s taxes, according to his 2010 tax return and preliminary return for 2011. All told, Romney will have paid about $6 million in taxes over the past two years.
The Romneys, who have homes in multiple states, used their Belmont address to file their main tax return
The disclosure confirms what Romney, whose total wealth is estimated as high as $250 million, suggested last week: he pays a lower tax rate than many Americans because he earns most of his income from investments. Investment income is taxed as low as 15 percent, while ordinary wages are taxed as high as 35 percent.
In a conference call with reporters this morning, Romney’s campaign denied suggestions that Romney dodged any taxes by investing in funds based in the Cayman Islands or using other aggressive tax maneuvers His aide said he reported all the income he earned from accounts in the Caymans.
“Governor Romney’s investments are reported and taxed in full compliance with US tax laws,” said Ben Ginsberg, a lawyer for the campaign. “Governor Romney has paid 100 percent of what he owes.”
The Romneys invested portions of the their Individual Retirement Account assets in Bain Capital funds registered in the Caymans, rather than in similar US funds. The forms also show that Romney had a Swiss bank account in 2010.
Brad Malt, a trustee who manages Romney’s investments, said he opened the account in 2003 to diversify Romney’s holdings – not to hide any assets—and closed the account in 2010 when it became clear it could become a campaign issue. “It just wasn’t worth it,” Malt said.
Like many Americans, Romney lowered his taxes by donating to charity. His tax forms show he gave $7 million, or about 16 percent of his income charities, with the majority, $4.1 million, going to his church, the Church of Jesus Christ of Latter-day Saints, known as Mormons.
Romney’s disclosure comes less than a week after rival Newt Gingrich released his 2010 tax returns. Gingrich’s return showed that he and his wife earned nearly $3.2 million in 2010 and paid nearly 31 percent of that in taxes. The forms also show that the couple gave more than $81,000 to charity, a little over 2 percent of their income.
The other two major candidates for the Republican nomination for president have not released their returns. US Rep. Ron Paul joked in a debate last week that he’d probably be embarrassed to release his returns because of his income is modest compared to Romney. And former Pennsylvania Senator Rick Santorum said he didn’t have ready access to his returns, because they were stored on his computer at home.
Until recently, Romney was seen as the clear front runner in the nomination process,, but Gingrich’s victory in South Carolina is threatening that position. Romney’s refusal to release his tax returns provided a line attack for Gingrich and other rivals during the South Carolina campaign.
As recently as two weeks ago, Romney said he had no plans to release his returns. Then he said he would release them in April, but was vague about whether he would release returns for multiple years. On Sunday, Romney finally committed to releasing his 2010 tax return and a summary of his 2011 return today.
Now, political analysts say, Romney may have hurt his standing by shifting his positions on his returns.
The disclosures could also help fan the debate about how much Americans should pay in income taxes and whether the wealthiest Americans can afford to pay more. Some Democrats said they’ll renew their push to change the tax code so that the compensation for hedge fund managers and private equity executives is taxed at the same rate as other wages. Currently, many fund managers report much of their compensation as investment income, which is taxed at the lower 15 percent rate for capital gains, rather than the higher rates for earned income.
Romney spent most of his business career running Bain Capital, a Boston private equity firm he cofounded, before he left in 1999. Romney’s aides revealed that he earned nearly $13 million in 2010 and 2011 from investments in Bain Capital and similar partnerships – earnings referred to as “carried interest.”
Most Americans pay less than the top published income tax rates because of deductions, credits, and others reasons. The average taxpayer, earning a little over $65,000, likely paid about 9 percent in income taxes and 16 percent in payroll and income taxes combined last year, according to the Tax Policy Center, a think tank in Washington.Todd Wallack can be reached at email@example.com. Follow him on Twitter @twallack.