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Romney paid $3 million in taxes

By Jack Gillum and Stephen Braun

Associated Press

LAST UPDATED: 09:12 a.m. HST, Jan 24, 2012

WASHINGTON >> Mitt Romney's newly released tax returns represent an extraordinary accounting of the household finances and far-reaching corporate investments of one of the richest U.S. presidential candidates in generations, with an annual income that tops $20 million.

How the details of Romney's extensive wealth will play among Republican taxpayers, rival campaigns, the media and the American public only started to emerge Tuesday, as more than 500 pages from a 2010 tax return and a 2011 estimate spilled out both significant and minor revelations about Romney's scattered holdings, tax strategies and charitable donations.

The returns outline both the dimensions of Romney's finances and the complexity of the tactics used to reduce his effective tax rate close to the low 15 percent paid by many middle-class Americans. Among the new details contained in the documents are Romney's continuing profits from the private equity firm he founded but no longer runs, a Swiss bank account closed just as Romney launched his White House run and new listings of investment funds that were set up in offshore locations from the Caribbean to Ireland and Luxembourg.

Romney's advisers stressed that he met all his federal tax obligations, provided maximum transparency and did not take advantage of "aggressive" strategies often used by the ultra-rich. Still, for millions of American taxpayers who are just beginning to grapple with their latest returns as tax season looms, Romney's multimillion-dollar returns provide a window into an unfamiliar world.

Tax law experts familiar with the formidable financial portfolios of investment fund managers said Romney's returns would at the very least reinforce the rising public issue of income inequity.

"The average American has a hard time understanding their own two-page tax return let alone Gov. Romney's 200-page return," said Joseph Bankman, a Stanford University professor of business and law who has testified to Congress on tax issues. "What would jump out at anyone is the sheer amount of money and low tax rate he pays, as well as the enormous complexity of his financial transactions."

Romney paid about $3 million in federal income taxes in 2010, having earned more than seven times that from his investments. That income, $21.7 million, put him among the wealthiest of American taxpayers. Romney's campaign said Tuesday he followed all tax laws.

At the same time, Romney gave nearly $3 million to charity — about half of that amount to the Mormon Church — which helped lower his effective tax rate to a modest 14 percent, according to records his campaign released Tuesday.

Romney's income puts him in the top 0.006 percent of Americans, based on the most recent Internal Revenue Service data, from 2009. That year, only 8,274 filers reported income above $10 million.

He could be worth up to $250 million, based on previously released financial information.

The documents were released as President Barack Obama prepared to deliver his State of the Union message, in which he is expected to talk about economic fairness.

Asked during a round of TV interviews Tuesday about Romney's tax rate, given that he's a multimillionaire, White House adviser David Plouffe said: "We need to change our tax system. We need to change our tax code so that everybody is doing their fair share."

Other Democratic Party voices were less restrained. "He used every loophole in the book available to the wealthy and corporations to avoid paying his fair share," said Democratic National Committee Executive Director Patrick Gaspard.

Romney's GOP rivals had no immediate comment. But House Speaker John Boehner, R-Ohio, defended the Romney's tax rate as being close to what most Americans pay on long-term capital gains from the sale of investments.

"We all know that there's a reason we have low rates on capital gains," Boehner told reporters "That is because it spurs new investment in our economy and allows capital to move more quickly."

Romney had long refused to disclose any federal tax returns, then hinted he would only offer a single year's return in April. But mounting criticism from his rivals and a hard loss in last week's South Carolina primary forced his hand.

For 2011, Romney will pay about $3.2 million with an effective tax rate of about 15.4 percent, the campaign said. Those returns haven't yet been filed yet.

In total, he would pay more than $6.2 million in taxes on $45 million in income in the past two years, his campaign said.

"Gov. Romney has paid 100 percent of what he owes," said Benjamin Ginsberg, the Romney campaign's legal counsel. Ginsberg and other advisers insisted Romney did not use any aggressive tax strategies to help reduce or defer his tax income.

The advisers acknowledged that Romney continues to earn money from investments from Bain Capital, the Boston-based private equity firm the candidate founded and managed between 1984 and early 1999. Under an agreement with the firm when he left, Romney continued to earn "carried interest" on new Bain investments as a former partner in the firm even though he no longer ran the operation.

Romney earned $7.5 million in Bain earnings in 2010 and expects to make $5.5 million in 2010, Ginsberg said.

The former Massachusetts governor had been cast by his GOP opponents as a wealthy businessman who earned lucrative payouts from his investments while Bain slashed jobs in the private sector. Rival Newt Gingrich released his 2010 returns last Thursday showing he paid almost $1 million in income taxes, a tax rate of about 31 percent.

Romney's advisers acknowledged Tuesday that Romney and his wife, Ann, had a bank account in Switzerland as part of her trust. The account was worth $3 million and was held in the United Bank of Switzerland, said R. Bradford Malt, a Boston lawyer who makes investments for the Romneys and oversees their blind trust, which was set up to avoid any conflicts of interest in investments during his run for the presidency.

In 2009, UBS admitted assisting U.S. citizens in evading taxes, and agreed to pay a $780 billion penalty as part of a deferred prosecution agreement with the U.S. Justice Department.

Malt said he closed the account in early 2010 for "diversification" and because it "just wasn't worth it." He sidestepped a question about whether he did so because the account could have been a political liability, saying it "might or might not be inconsistent with Gov. Romney's political views." Malt has sold off other accounts in recent years — including investments in firms that did business with Iran and China — because of possible political inconsistency or embarrassment with Romney's political positions.

Malt also confirmed that some of Romney's investments are routed through affiliate funds set up in the Cayman Islands. He insisted there were no actual offshore accounts, and added that Romney paid the same amount of U.S. taxes using the Cayman affiliates as he would have if the investment funds were set up in the U.S.

Romney's 2010 tax return also shows a number of foreign investments, including funds based in Ireland, Switzerland, Germany and Luxembourg. The documents also detailed another investment fund routed through a Bain Capital affiliate set up in Bermuda.

The returns showed about $4.5 million in itemized deductions, including $1.5 million to the Church of Jesus Christ of Latter-Day Saints.

Romney's charitable giving is above average, even for someone at his income level. In 2009, more than 37 million filers claimed charitable deductions averaging more than $4,000. Among those making more than $10 million, the average charitable deduction was about $1.7 million, according to the IRS.

Before the tax records were released, Romney's old investments in two government-backed housing lenders stirred up new questions at the same time his campaign targeted Gingrich for his work for Freddie Mac.

Gingrich earned $1.6 million in consulting fees from Freddie Mac. Romney has as much as $500,000 invested in the U.S.-backed lender and its sister entity, Fannie Mae.

The fight over releasing the tax information highlighted an argument that Democrats are already starting to use against Romney — that he is out-of-touch with normal Americans. And it probably hurt him in the South Carolina primary, where he lost by 12 percentage points to Gingrich after spending several days resisting calls to release the returns.


Associated Press writers Kasie Hunt reported from Tampa and Stephen Ohlemacher from Washington.

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hukihei wrote:
15% in taxes, wish we could all be so lucky. That's the rub, his tax rate.
on January 24,2012 | 07:26AM
Pacej001 wrote:
Most of us ARE that lucky. Starting at the income of the lowest 20% of taxpayers and going up in 20% increments, here's the effective Federal income tax rate for 2007: 4%for lowest 20%, 10.6% for the next to lowest, 14.3%(middle class), 17.4, and 25.1% for the top 20% of earners. The US has one of the most progressive tax systems in the world. Also, Romney's income, probably from low taxed dividends and capital gains, has already been subjected to/reduced by the corporate income taxes before he received it. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?DocID=456&Topic2id=20&Topic3id=22
on January 24,2012 | 08:37AM
KekoaBradshaw wrote:
Problem is that we're not talking income tax here. Most of Mitt Romney's income is capital gains, which is taxed at a much lower rate than the 25.1% figure you quiote for the top 20% of earners. While you say "earners", what you really should say is "wage earners". That's not where the vast majority of Romney's incomce comes from. To be faiir to the rest of us, Romney's income should be taxed at the 25.1% figure you quoted. He makes a lot more, he should pay more for the privilege of living in the USA.
on January 24,2012 | 09:29AM
Pacej001 wrote:
The stats I used are from the IRS and include all sources of income, wages, capital gains, interest, etc. Taken in aggregate, the top 20% don't just live on capital gains income. So how would the new Romney tax work? Would all capital gains be taxed at this rate? If so, would that retard investment? Maybe. Lets say I agree with you, that he should be taxed more. Does the fact that he is paying what current law requires somehow make him a bad person, unfit to be president? I don't think so.
on January 24,2012 | 04:08PM
Pacej001 wrote:
Here's another thing: since 1979, effective tax rates on ALL income levels have dropped by 4% (the lowest earners went from paying 8% in 1979, to 4% in 2007, except for the highest income earners whose effective tax rate dropped 2%. Bottom line: What you read in the papers about an unfair tax code and middle class paying more is a lie.
on January 24,2012 | 09:22AM
NanakuliBoss wrote:
Has no clue on the other 99%, yet his asking for our vote? Geez. This guy could buy his presidency.
on January 24,2012 | 09:12AM
KekoaBradshaw wrote:
He should consider paying voters to vote for him. If he paid me enough, say $10,000 (chicken feed to ol' Mitt), he'd get my vote.
on January 24,2012 | 09:23AM
nodaddynotthebelt wrote:
It really is unfair that a multimillionaire can pay $3 million in taxes while a struggling family has to pay almost half their income to Uncle Sam. It is downright unfair. When you see a divorce settlement of such athlete as Kobe Bryant who gave up three mansions to his ex-wife it makes you wonder. There should be a yearly tax on a second home or luxury car. Unfortunately it is the rich that get all the tax breaks. Why? Because of the fact that they have a lot of power when it comes to our congressmen. They hold the money that enables the reelection of these puppets. If Obama is smart he will rein in this tax inequity and use it to his advantage. The rich may hold a lot of power in congress but the poor and middle class outnumber the them. It is time we begin to question candidates where they stand when it comes to taxation of the poor, middle class and the rich.
on January 24,2012 | 09:27AM
Pacej001 wrote:
A struggling family doesn't come close to paying half their income in taxes. And if the rich get all the tax breaks, how come the top 10% of earners pay 70% of all income tax revenues while roguhly 50% of the population pays nothing in income tax.
on January 24,2012 | 04:11PM
Dragonman wrote:
Well said nodaddynotthebelt. They need to be held accountable. They need to pay their fair share of taxes. Did you know that if elected to congress, even if they serve only one term they qualify for full pension and medical. If they had to live on our retirement benefits & retirement medical coverages I am sure they would enact legislation to benefit themselves and and in the process help us also, instead they ( Republicans ) are trying to cut social security and medicare.
on January 24,2012 | 12:17PM
NanakuliBoss wrote:
That's one fat Elephant (GOP).
on January 24,2012 | 01:40PM
ufried wrote:
hey all you robots... stop watching the news channels and do some research for yourself! did he earn his money legally? did he not pay taxes? why so jealous? stop hating!!! i wanna be rich some day,i want everyone else to be rich some day!! why worry about what somebody else has... if you want what they have,work harder!! fair shmair... be mad if they do something illegal. geez
on January 24,2012 | 04:22PM
ufried wrote:
Bunch of whiners!! "If they had to live on our pensions"!! You should of got a better job!!! I got a job, got my health,i pay taxes and high fuel bills. WHO CARES what someone else has... Wanna pay your fair share? Give a homeless person a 1/4 of your pension!! If not... BE HAPPY YOUR ON THE RIGHT SIDE OF THE GRASS (the top not the bottom) lol
on January 24,2012 | 04:33PM
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