From Reuters:
Mitt Romney disclosed early on Tuesday that he expects his tax bill to come to $6.2 million on income of $42.5 million the last two years, succumbing to public pressure to shed light on how he became one of the wealthiest Americans ever to run for president. … Romney paid an effective tax rate of 13.9 percent on $21.6 million in 2010 income and expects to pay 15.4 percent on $20.9 million in 2011 income, his campaign said. He said previously that he estimates his net worth at $190 million to $250 million. … Romney had total capital gains income of $12.5 million for 2010 and an estimated $10.7 million for 2011. …
Much of Romney’s fortune likely qualifies as what is known as “carried interest,” a share of profits earned by private equity managers taxed at the 15 percent capital gains tax rate rather than the maximum 35 percent wage rate. Private equity managers, some hedge fund executives and venture capitalists benefit from carried interest. Campaign officials said Romney had carried interest of $7.4 million in 2010 and $5.5 million in 2011. … Romney has a $100 million trust set up for his five sons. The campaign said the Romneys paid no gift taxes on the trust because they were able to use credits related to estate tax. …
As a devout Mormon, Romney gives away at least 10 percent of his income to the Mormon church, a practice known as tithing. The documents showed he and his wife, Ann, contributed more than $7 million in charity over the two years, averaging over 16 percent of his income.
A few initial thoughts:
1. So as it turns out, less than a third of Romney’s annual income is from carried interest, the performance fee that fund managers charge that is taxed at the preferential 15 percent capital gains tax rate.
2. Romney paid 16 percent of income in charitable giving the past two years. Wow, that is a lot. The studies I’ve seen put the annual figure for the average American in the 2-4 percent range.
3. Romney’s effective tax rate is around 15 percent. Even including payroll taxes, Romney pays a higher effective tax rate than 60 percent of Americans. Here are average effective tax rates in 2010 for various income groups (via the Tax Policy Center):
4. So given this release, the only reason to make a political issue out of Romney’s taxes is if you are trying to inspire antipathy toward wealthier Americans in general and Romney in particular just because they are wealthy. And even that route makes little sense. Romney’s taxes show just how progressive the U.S. tax system is, with “the rich” shouldering an incredible burden. Indeed, no advanced economy leans on upper-income households as much as America does.
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While some can mince words all day long, how about a little redux: Video of Romney talking to citizens: ” I am unemployed ” – which was spun to mean that he was just another guy. So, how many of the unemployed citizens – out here in the real world made $42M?
Parse words all you want, all most American’s see is that this wannabee is extraordinarily wealthy and his claim to being “just like everyone else” is false.
Yep, we hear it everyday: the wealthiest of American’s are paying xxx % of all the income taxes in the US. This faux argument takes away from the real fact that Average Joe is paying taxes, but because their income is low – the wealthy should pay less to be “just like Joe”.
Let’s look at the impact of 1) “less than a third of Romney’s annual income is from carried interest, the performance fee that fund managers charge that is taxed at the preferential 15 percent capital gains tax rate.”
Over two years, Romney made 12.9 million in carried interest (about 30% of 42 million) If taxed at the wage rate of 35% rather than the preferential rate of 15%, he would have paid an additional 2.58 million dollars in taxes, bringing his total taxes over 2 years from 6.2 to 8.78 million off of 42 million in income or 14.7% to 20.6%.