Republican presidential candidate Mitt Romney paid $1.9 million in taxes on $13.7 million of income in 2011 for a 14.1 percent rate, according to tax returns he released today.
Romney and his wife, Ann, make most of their income from investing an estimated $250 million fortune, and much of that income is taxed at a top rate of 15 percent, rather than the top rate of 35 percent for wages. In 2011, Romney reported no income from wages, $6.8 million from capital gains and $3 million from taxable interest.
The Romneys donated more than 29 percent of their income to charity, including more than $1.1 million in cash to the Church of Jesus Christ of Latter-day Saints.
The investment tax breaks could have kept Romney’s tax rate below 13 percent, which last month he said was at least what he had paid over the past decade. To stay above that level for 2011, Romney didn’t claim all of the deductions for charitable contributions that he could, according to a blog post by Brad Malt, a partner at Ropes & Gray LLP in Boston who manages Romney’s investments.
“He has been clear that no American need pay more than he or she owes under the law,” Michele Davis, a campaign spokeswoman, said in a statement. “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%. He directed his preparers to ensure that he is consistent with that statement.”
One in 17,000
Romney, 65, is a former Massachusetts governor and co- founder of Bain Capital LLC, the Boston-based private equity firm. His returns, which include three trusts, reflect the wealth and income profile of a small fraction of U.S. taxpayers with investments around the world. In 2009, according to the Internal Revenue Service, about 1 in 17,000 households reported adjusted gross income exceeding $10 million.
Romney had previously released his 2010 tax return, which showed that he paid a 13.9 percent rate on $21.7 million in income. Democrats have criticized Romney for not releasing more years of tax returns. Senate Majority Leader Harry Reid, a Nevada Democrat, has said he was told by someone with knowledge of Romney’s finances that he hadn’t paid any federal income taxes in some years.
Faced with such criticism, Romney has refused to release more returns, while on Aug. 16 telling reporters he paid a minimum tax rate of at least 13 percent in each of the past 10 years.
Earlier this year, when the campaign released Romney’s estimated 2011 tax return, the couple’s projected income was $20.9 million, so the contributions as a share of income would have been lower than they ultimately were.
The campaign’s statement today doesn’t explain the difference between that projection and the Romneys’ actual income of $13.7 million. The campaign’s website notes that the Romneys’ income can vary from year to year depending on the value of investments and whether they are sold.
The campaign released a letter from PricewaterhouseCoopers LLP, which prepares Romney’s returns, summarizing his filings for the past 20 years. During that period, from 1990 through 2009, Malt wrote, Romney’s average annual effective federal tax rate was 20.2 percent and the lowest rate he paid in that period was 13.7 percent. The PwC letter doesn’t say how much income Romney received in any of those years.
During much of that period, capital gains rates were higher than the current 15 percent. The rate dropped to 20 percent from 28 percent in 1997 and to 15 percent in 2003.
Higher Effective Rates
“Of course he had higher effective tax rates in many of those years because the capital gains rates were higher,” said Clint Stretch, a tax attorney based in Washington and former managing principal of tax policy at Deloitte Tax LLP.
For 2011, the returns showed that the Romneys paid $1.3 million in state and local income taxes along with $214,728 in real estate taxes. They paid $674,512 under the alternative minimum tax, a parallel tax system that disallows some deductions.
Romney has proposed eliminating the AMT and lowering ordinary income tax rates by 20 percent, along with curtailing unspecified tax breaks for top earners.
The returns show that the Romneys have investments in funds located around the world, including Ireland, the Cayman Islands and Bermuda. They received $3.5 million in foreign income, according to the returns.
Ann Romney’s Horse
The returns no longer list Ann Romney’s Olympic dressage horse, Rafalca, as a business. In 2010, the couple claimed that the business, Rob Rom Enterprises LLC, lost $77,731 and generated a $50 deduction, with the remaining tax break potentially available for future years.
“In 2011, the activities of Rob Rom LLC were considered, for tax purposes, to be personal in nature and as a result the expenses are not reported on the 2011 tax return,” the campaign said in a statement in response to questions.
Romney aides wanted to put some distance between the release of the tax returns and the first of his three debates next month with President Barack Obama, which takes place Oct. 3 in Denver.
Obama Campaign Comment
In a statement today, Stephanie Cutter, Obama’s deputy campaign manager, said Romney is still leaving voters in the dark.
“Why does Mitt Romney not just release the full returns, instead of the bare summary he has provided of the last 20 years, so voters can make their own judgments about Mitt Romney’s finances?” she said.
Obama and his wife, Michelle, filed their 2011 tax returns in April. They reported paying a 20.5 percent federal tax rate on $789,674 of adjusted gross income.
Romney has previously said that paying more taxes than required should disqualify him from becoming president.
“I don’t pay more than are legally due, and frankly if I had paid more than are legally due I don’t think I’d be qualified to become president,” he said in an interview with ABC News on July 29. “I’d think people would want me to follow the law and pay only what the tax code requires.”
Romney gave in to public pressure during the Republican primaries earlier this year to release his 2010 tax return, saying at the time that he would disclose his 2011 filing when it was completed. He had requested an extension and the return released today was due by Oct. 15.
The Romney campaign sought to use the release of the returns to return to talking about the economy.
“It’s time for us to discuss the real choice facing voters this year,” Virginia Governor Bob McDonnell said in a statement released by the campaign. “Mitt Romney and Paul Ryan are running to get America creating wealth again, while President Obama is running to redistribute wealth.”
Romney’s father, George, a onetime Michigan governor, released 12 years of tax returns when he ran for president in 1968. Mitt Romney gave 23 years of filings to Republican presidential nominee Senator John McCain of Arizona when Romney was being considered for the vice presidency in 2008.
Romney’s campaign also released a letter today from his personal physician declaring the candidate in good health.
“There are no physical impairments that should interfere with his rigorous and demanding political career as the next President of the United States,” wrote Randell Gaz, a surgeon at Massachusetts General Hospital, in a letter dated Aug. 25.
Romney, who weighs 184 pounds, has a low resting heart rate and takes a small dose of aspirin and Lipitor daily. He is allergic to penicillin.
“He eats a high fiber diet with abundant fruits and vegetables and minimizes intake of high cholesterol foods and concentrated sweets,” wrote Gaz, who has treated Romney since 1989.
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