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January 24, 2012 8:40 AM What we’ve learned from Romney’s returns

By Steve Benen

Mitt Romney’s campaign, as promised, released the former governor’s 2010 tax returns, as well as an estimate for his 2011 returns, and we’re starting to get a sense of why the Republican candidate wasn’t eager to share these details.

Mitt Romney offered a partial snapshot of his vast personal fortune late Monday, disclosing income of $21.7 million in 2010 and $20.9 million last year — virtually all of it profits, dividends or interest from investments.

None came from wages, the primary source of income for most Americans. Instead, Romney and his wife, Ann, collected millions in capital gains from a profusion of investments, as well as stock dividends and interest payments.

By any fair estimate, over $42 million in income over two years isn’t bad for a guy who jokes about being “unemployed.” Indeed, Romney would be in the top 1% based solely on the income he makes in one week.

Romney said last week that his rate was “closer to 15%,” but as it turns out, despite his vast wealth, he actually only paid a 13.9% rate last year — lower than his political rivals who aren’t nearly as wealthy, and lower than most middle-class American workers.

And what about those overseas investments?

His 2010 return also showed that he had a financial account in Switzerland that was closed in 2010 and that he generated income from overseas investments. He also reported financial accounts in Bermuda and the Cayman Islands.

A Reuters report added that Romney’s Swiss bank account was closed in 2010 “after an investment adviser decided it could be politically embarrassing to Romney.”

I suspect those with far more expertise in this area will subject these materials to considerable scrutiny, but at first blush, the disclosure appears to raise at least as many questions as it answers.

Why did Romney set up $100 million trust funds for his sons without paying any gift taxes? Were his accounts in the Caymans and in Switzerland created to avoid paying taxes? Was the closing of the Swiss account related to this IRS investigation? And given all of the questions surrounding Romney’s Bain-era work, why does the Republican candidate continue to insist he won’t disclose returns from previous years?

What’s more, following up on a point from last week, even if Romney argues that he’s simply playing by the rules — taking advantage of existing tax loopholes to pay lower rates than much of the middle class — this doesn’t explain why Romney is eager to exacerbate issues on tax fairness with his tax plan that makes the problem worse.

In a debate over tax fairness and income inequality, Romney is practically a case study for What’s Gone Wrong, but he can at least plausibly argue that this is a mess he benefits from, but didn’t create. Romney, however, prefers to believe the problem doesn’t exist.

Greg Sargent did a nice job capturing the larger political context:

I’m not sure the Obama campaign could have scripted this more perfectly. In a remarkable bit of good timing, President Obama is set to deliver a State of the Union speech focused on income inequality and tax unfairness on exactly the same day that Mitt Romney will reveal that he made over $40 million in the last two years — all of it taxed at a lower rate than that paid by middle class taxpayers. […]

Romney doesn’t just disagree with Obama on these fundamental issues; he personally symbolizes virtually the entire 2012 Democratic message. He is the walking embodiment of everything Dems allege is wrong with our system and the ways it’s rigged in favor of the wealthy and against the middle class. Yet this is the standard bearer the GOP seems set to pick.

Romney and his aides believe these materials should end the discussion. That’s backwards — the larger debate is just beginning.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

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  • c u n d gulag on January 24, 2012 8:50 AM:

    Now that it's going to get warmer soon, maybe it's time to start a OMR Movement - Occupy Mitt Romney.

  • DAY on January 24, 2012 8:51 AM:

    20 million taxed @ 13.9%=$2.78 million
    20 million taxed @ 39 %= $7.8 million

    How can anyone get by with just $12.2 a year?
    Mitt, we feel your pain. . .

  • Danp on January 24, 2012 8:54 AM:

    1) If Romney closed his Swiss accounts for political reasons, but not his Cayman Island accounts, it's pretty reasonable to assume it has to do with the USB/Phil Gramm scheme.

    2) No wages? What happened to the $374K from speeches? Did he declare that a non-profit sale of intellectual property?

  • j on January 24, 2012 8:56 AM:

    I feel for Mittens, no wonder he wants to slash social security and medicare to give himself a lower tax rate.
    The tax returns that would give a better insight into the world of Mittens are those covering his time at the helm of Bain, that is why he only released his 2010 (promising to pay more in 2011)

  • Sadie on January 24, 2012 8:59 AM:

    Where's the birth certificate? I mean the long form. I didn't get out my calculator for nothing.

  • Brenna on January 24, 2012 9:00 AM:

    This is crazy. This is exactly the argument Obama has been using against the unfair tax advantages for the rich. And the republicans fiercely have been defending it. How can they say Romney is an actual job creator, other than his accountants and campaign staff?

    Romney will now be more defensive and even angrier in warding off attacking for capitalization and free enterprise, but wow, what a weak argument when hardworking Americans are paying more on so much less. The irony of all this is stunning.

  • Tired Liberal on January 24, 2012 9:00 AM:

    The real crime here is that this is all legal.

  • chopin on January 24, 2012 9:07 AM:

    Best to NOT hand Willard the envy argument. Instead, ask him to provided details on the many jobs his millions in legal tax windfalls created. This should kick the substance out of the argument that Shrub's tax cuts for the wealthy do ANYTHING for the economy.

  • chopin on January 24, 2012 9:10 AM:

    I like your thinking, Brenna. That is indeed the message that needs to be hammered home over and over and over.

  • stevio on January 24, 2012 9:12 AM:

    Wow.

    Pass the popcorn. This is going to get very interesting very quickly. Every stinking one of them is from the 1%. So, the trick for these bozos is going to be trying to find a GOPer who they can nominate at their Convention via a floor fight who is poor.

    Good luck with that...

  • chopin on January 24, 2012 9:15 AM:

    There is another angle to this wealth envy argument. Warren Buffet is worth 200 times what Williard is. And he has clearly stated that 99% of his wealth will be handed over to the Bill and Melinda Gates Foundation which I believe he has said is very efficient at looking out for the needy. I don't envy Buffet or the Gates. I admire them. Perhaps MittShit can enlighten us and tell us of the charities he supports (church excluded) AND the jobs he creates.

  • Ron Byers on January 24, 2012 9:18 AM:

    I think Tired Liberal says it best. Everything Romney did appears to be totally legal, yet his tax rate is lower than any middle class wage earner I know.

  • Jose Padilla on January 24, 2012 9:21 AM:

    I'm guessing that with annual taxable income of $20 million a year, Mitt's worth a lot more than the $250 million that's been estimated.

  • Crusty the Clown on January 24, 2012 9:24 AM:

    I'm just a clown, so feel free to ignore what I say, BUT....

    We only have two data points, but they indicate a trend. The Mittster's tax rate was 1.5% lower in the first year of the release: ergo, it was even lower before that, viz.:
    year eff. tax rate, %
    2011 15.4
    2010 13.9
    2009 12.4
    2008 10.9
    2007 9.4
    2006 7.9
    2005 6.4
    2004 4.9
    2003 3.4
    2002 1.9
    2001 0.4
    2000 -1.1

    No wonder he doesn't want to release his last decade's tax returns!! Yow!! He's a one-man General Electric!

  • Oh my on January 24, 2012 9:25 AM:

    The irony of all this is stunning.

    Republicans have long since killed and buried any sense I used to have of irony. Whether they pick Romney or Newt, the Republican party is declaring what matters most to them with all the subtlety and nuance of a country-sized wrecking crane.

  • flyonthewall on January 24, 2012 9:26 AM:

    "Everything Romney did appears to be totally legal, yet his tax rate is lower than any middle class wage earner I know."

    And add that his tax plan, or any republican tax plan, would cut that 13.9% at least in half and still would be legal.

  • R on January 24, 2012 9:28 AM:

    "Romney would be in the top 1% based solely on the income he makes in one week." Wow. That takes a few minutes to sink in. Thank you, Steve, for using the word "makes" and not "earns" there -- my dictionary has, as one definition of earn, "gain or incur deservedly in return for one's behavior or achievements." Not in this case.

  • jim filyaw on January 24, 2012 9:30 AM:

    i hope i'm wrong (willard is too easy a target), but i suspect that the clock is running on his candidacy. it won't last until the convention.

  • RepublicanPointOfView on January 24, 2012 9:33 AM:

    Further evidence that Mitt is correct that he and his fellow middle class quarter-billionaires are the job creators and would create more jobs if only their enormous tax burdens were reduced!

    Just think how many jobs Mitt has created thru his off-shore accounts in the Cayman Islands, Switzerland, Luxembourg, and Ireland!

    If only the capital gains tax rates could be reduced to zero, then the job creators would have us with full employment.

    However, as an investor myself, I question why Mitt would continue his off-shore accounts that are NOT tax shelters when they are shown as having a rate of return about that of an interest bearing checking account in the U.S.

  • Danp on January 24, 2012 9:39 AM:

    Couple interesting facts from the 2010 form:

    1) His speaking fee income was $480,115 after deducting for expenses. That got reported as business income as opposed to wages. That is business as in those "small businesses" that Obama wants to kill with high tax rates.

    2) The calculation for his Alternative Minimum Tax is 232,989 dollars. On 21 million dollars of income. Apparently all his investment income is exempt from that calculation. Why do we keep fixing the AMT without really fixing it?

  • Sgt. Gym Bunny on January 24, 2012 10:00 AM:

    Paul Krugman notes in an article last week that Romney the First actually "paid 37% of his income in taxes". The Dems definitely need to seize upon this tidbit just to illustrate how far taxes have fallen for the uber-rich. Comparing what Mitt I paid in taxes in the olden days to what Mitt II now pays--I couldn't think of a better legacy to use to highlight the upward redistribution of income. If Mittbot must be the whipping boy for generations of skewed tax policy, so be it.

    Really, it is a quite fortunate convenience that the Father-Son presidential campaigns can really illuminate how far tax policy has come over the last thirty-some years.

  • T2 on January 24, 2012 10:01 AM:

    We learned Romney gave 2.6 Million dollars to the Mormon Church. That's a lot. No wonder Mitt has such a large cadre of young Mormon's working the ground in his campaigns.

  • Sgt. Gym Bunny on January 24, 2012 10:02 AM:

    correction: "Romney I" and "Romney II"

  • AMS on January 24, 2012 10:14 AM:

    As with most issues, income inequality can seem a bit abstract without a concrete illustration. Mitt's tax returns provide that concrete illustration and drive the issue home in a very powerful way. It's extremely unfortunate for the GOP that their probable standard-bearer is such a perfect Exhibit A for one of the Democrats' signature issues in the upcoming presidential campaign.

  • OKDem on January 24, 2012 10:20 AM:

    Why did Romney set up $100 million trust funds for his sons without paying any gift taxes?

    Whoa! There are five Romney sons! Is that $500 million or $100 million total?

    On top of that, Romney has between $60 to $100 million of Bain shares in an IRA. That is not taxed or reported on the 1040. One can assume that grew at 5% last year and is $3 million to $5 million more not on the 1040.

    The real rate on total earnings is really nearer 10%.

    Guess how Willard [http://en.wikipedia.org/wiki/Willard_%281971_film%29] will encourage saving for retirement to replace SS? Maybe convert IRA's to Roths?

    http://www.reuters.com/article/2012/01/24/us-usa-campaign-romney-ira-idUSTRE80N04E20120124

  • g on January 24, 2012 10:22 AM:

    A Reuters report added that Romney’s Swiss bank account was closed in 2010 “after an investment adviser decided it could be politically embarrassing to Romney.”

    "I'm running for office, for Pete's sake!"

  • johnny canuck on January 24, 2012 10:24 AM:

    > I'm putting out two years, which is more than anyone else on this stage

    I`m having trouble digesting this line. this seems to me to be setting up another Democratic score.
    So when he is on the same stage as Obama, how does that compute!!!
    I must say if i were Obama i would be releasing my returns back to before law school....

  • Texas Aggie on January 24, 2012 10:24 AM:

    I don't think that Mitt's people believe that this is the end. They took the path of least resistance in releasing his tax returns because it was causing enough of a problem that Gingrich was eating his lunch. Now they plan to drag their feet in releasing the rest in dribs and drabs, as they know they eventually will have to, until the campaign is over. They must know that more releases will just make the problem worse so they're doing it as slowly as possible to reduce the damage as much as possible.

  • jsjiowa on January 24, 2012 10:34 AM:

    How can Romney credibly argue that he's the right candidate to rebuild the American economy and create jobs when he has so many investments stashed in foreign accounts and investments? Is that someone who really believes in America?

    Now I'm even more interested in seeing the tax returns for the years he was at Bain. Good for you Mitt that you found a way to make a killing in the economy, but show us you've paid all the taxes on those "rewards".

  • arkie on January 24, 2012 11:00 AM:

    I'm confused. Here is a chart showing the effective individual Federal income tax rates (actual tax divided by AGI) paid by Americans between 1977 and 2007: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456

    I checked my 1040s and this chart seems to be reasonable (assuming that there is little difference between 2007 and 2010 rates). I'm in the 4th quintile and paid about 6% last year. And Mitt's return seems to make sense but why is Newt's so far out of whack?

  • Barbara on January 24, 2012 11:11 AM:

    Three things that the American public understands: Swiss bank accounts, Cayman Islands, and a 13.9% effective tax rate.

    Who would have thought that lobbyist Newt could win over tax cheat Romney. Regardless of whether its in the tax code, Mitt took advantage of it. Who now thinks that Bain Capital was looking out for the working stiff?

  • Objective Dem on January 24, 2012 11:27 AM:

    This is a bit off topic but I was just thinking about Romney's job claims. A big issue to me is that many of the jobs he created were not "new" jobs, they were a reallocation of existing jobs to the company he helped finance. So for instance, I might have shopped at Office Depot or the Mom/Pop office supply store in the past but now shop at Staples. As a result Staples has more jobs, but the efficient nature of Staples likely results in fewer office supply jobs in the totality. This shifting to more efficient retail may be good for the economy but it doesn't mean jobs were created.

  • jima on January 24, 2012 11:30 AM:

    Two other inferences that are significant, but unfortunately don't make good sound bites:

    1) Mitt and the Republicans are running on how Obama has suppressed the business climate, but he made $40MM in investment income over the two years. Some awful business climate! I wish Newt would ask him how his investments did in the last year of the Bush administration.

    2) As a protected job creator, it's hard to see how the $40MM Mitt reaped in those years went to job creation. It would be interesting to ask him how his portfolio's companies did in creating new jobs in those two years.

  • Craig on January 24, 2012 12:20 PM:

    The irony in all this is that, Romney claims he's a job creator because of his work in the private sector.

    He then claims that gov. cannot create jobs therefore Obama hasn't created jobs.

    Then he claims that he wants to be elected as the leader of the government in order to create jobs!

    He wants his cake and eat it too.

  • Anonymous on January 24, 2012 12:37 PM:

    "A Reuters report added that Romney's Swiss bank account was closed in 2010 'after an investment adviser decided it could be politically embarrassing to Romney'."

    And the accounts in the Cayman Islands, Bermuda, Hong Kong, and the Isle of Man, WOULDN'T be "politically embarrassing to Romney" ?

  • linusbern on January 24, 2012 2:58 PM:

    Its funny, because they clearly chose the day of the state of the union to release this thinking that attention would be focused elsewhere, but instead he has made himself exhibit A to illustrate the point of Obama's state of the union.

    Nothing goes right for Mitt, the poor little rich boy.

  • booch221 on January 24, 2012 2:59 PM:

    Romney accuses Obama of taking his inspiration from the capitals of Europe. Maybe that's not a winning argument from a guy who had a Swiss bank account which he only closed because it could be politically embarrassing.

  • Mr. Reality Check on January 24, 2012 3:19 PM:

    Willard, Willard, Willard you really think Americans are envious of you and your income? That's not true partner I dont like the fact that I'm paying more taxes than you are. Plus you've been stashing money in other countries to avoid paying your fair share. In my book thats called stealing.

  • Walter White on January 25, 2012 1:52 AM:

    The only reason a US citizen wants to open a swiss account is to hide money. In Switzerland when you deposite money in a saving account, they do not pay you interest on your savings, you have to pay them a fee(3%-5%)annually as an administrave fee.
    What a shame Romney, your money is not worth investing it here in the US?
    How about the US stock market that burned many of us, how come Romney did not invest in it?
    Romney, you can run from the truth, but you can not hide.

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