Jan. 24, 2012— -- Mitt Romney earned more than $42 million over the past two years, and paid $6.2 million in taxes at an effective rate averaging 14 percent, according to documents provided by the Romney campaign today.
The tax rate that Romney paid both in 2010 and 2011 is less than what most middle-income Americans were required to pay, mainly because a majority of Romney's earnings were derived from investments rather than wages.
The former Massachusetts governor released his tax returns amid intense scrutiny into his financial records and repeated calls by his rivals, and even some supporters, to release his tax information.
In 2010, Romney made $21.7 million, on which he gave nearly $3 million in taxes at an effective tax rate of 13.9 percent. In 2011, the former governor earned a similar amount, and will pay more than $3.2 million in taxes at a rate of 15.3 percent.
It's "an extensive disclosure and we feel that it satisfies the public's, if not the Obama opposition research guide desire to look at the Romneys," the former governor's campaign counsel, Ben Ginsberg, said in a conference call this morning.
Romney's tax rate appears to be considerably low for someone with his amount of wealth, but Ginsberg pointed out that capital investments are taxed at the corporate level, at a rate of about 35 percent.
The returns also showed that Romney and his wife, Ann, gave away $3 million in charitable donations in 2010, including $1.5 million to the Mormon church. In the past two years, Romney and his wife, Ann, gave just a little bit less, about 10 percent, to the Church of Latter Day Saints.
The two put their assets in a blind trust when he became governor of Massachusetts in 2003.
One aspect of Romney's wealth that has come under some scrutiny are his investments in Cayman Island. Brad Matt of Ropes and Gray, Romney's trustee who handles his family's funds, clarified today that those investments are in "third party entities," not funds, and that it does not constitute a foreign account but rather a foreign investment. Matt said the decision to invest there was made by him, not Romney and that the two are not allowed to confer with each other on these investments.
Romney's portfolio included an account in a Swiss bank, but it was disposed off in 2010, the year that Romney announced his candidacy. Malt said the move may or may not have been aligned with Romney's political views, but Malt closed the account because "this account was not serving any purpose."
Malt said he set up that account for diversification, but some tax experts say he didn't need to invest in a Swiss bank to diversify Romney's portfolio. Rather, if he's worried about the financial health of one bank, he could have spread the wealth to different banks, without having to go to a Swiss institution, said Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, a non-partisan but left-leaning non-profit group. She added that there are some tax advantages from foreign investment that don't involve tax evasion.
Taxes on capital gains will be one focus of President Obama's State of the Union speech tonight. The president is a staunch supporter of what has come to be known as the "Buffet Rule," a minimum tax rate for all Americans in the top 1 percent income range so that they don't end up paying taxes at a lower rate than middle-class Americans.
"Billionaires should not pay a lower effective tax rate than the middle class," said White House Communications Director Dan Pfeiffer.
The idea stemmed from Warren Buffett, the billionaire investor and Obama supporter who has said that he should not pay a rate lower than his own secretary. "We can make sure everyone is being responsible, everyone is playing by the same set of rules. And the system both on Wall Street and in Washington is not being rigged at the expense of middle-class and working class Americans."
Republicans, however, say lower taxes, even on the wealthiest Americans, are tied to job creation.
"We all know that there's a reason we have low rates on capital gains. That's because it spurs new investment in our economy and allows capital to move more quickly," House Speaker John Boehner, R-Ohio, said today.
Romney was questioned about his tax release at Monday night's debate, where he said he wouldn't follow his father's lead and release 12 years' worth of returns. He also defended the tax rate that's less than what an average American pays.
"I pay all the taxes that are legally required and not a dollar more," Romney said. "I don't think you want someone as the candidate for president who pays more taxes than he owes."
That may be true, but some tax experts say Romney took advantage of loopholes in the system to pay a lower rate.
"All these disclosures, all these complicated, expensive transactions, all aimed to reduce his tax," Wilkins said. "The overarching message is, this is the way the tax system is tilted towards the wealthy. These are advantages middle income people don't get."
Newt Gingrich revealed his 2010 tax returns last week, which showed that the former House speaker made more than $3.1 million and paid nearly $1 million on his earnings, with an effective tax rate of 31 percent, the rate for the top one percent of earners. Most of those earnings, about $2.5 million, came from his companies and investments, and he earned $21,625 in speaking fees. Gingrich's net worth is more than $6.5 million, according to his personal financial disclosure forms.
The Romney campaign today was quick to point out that unlike the former governor, Gingrich did not release his full tax return, specifically documents that would've revealed his sources of income.