Romney Discloses Tax Returns

by Mike Godfrey, Tax-News.com, Washington

27 January 2012

Mitt Romney, one of the two leading Republican contenders for the United States Presidency, has, following some pressure to do so, divulged his tax returns for the past two years that, as expected, show the low effective tax rates he pays.

It was disclosed that, on an income of USD21.7m in 2010, Romney paid tax of about USD3m, an effective tax rate of 13.9%, while he has estimated that, on an income of USD20.9m last year, he will pay taxes of USD3.2m, a similar tax rate of 15.4%. That is significantly lower than the effective tax rates of 31% and 26% paid by both his main Republican rival, Newt Gingrich, and by President Barack Obama, respectively.

Much of the reason for his reduced tax bills arises from the fact that almost all of Romney’s income arises in the form of capital gains from a variety of investments, as well as from corporate dividend and interest payments. Capital gains in the US, for example, are taxed at a reduced rate of 15%.

Both his income from investments and his low tax rate have become an issue in Romney’s campaign for the Presidential nomination. Warren Buffett, the billionaire chairman and chief executive of Berkshire Hathaway, called last year for additional taxes on the “mega-rich”, which was subsequently picked up by the President. Buffett had then disclosed that his federal tax bill was only 17.4% of his taxable income – “and that’s actually a lower percentage than was paid by any of the other 20 people in our office," he said. "Their tax burdens ranged from 33% to 41% and averaged 36%.”

Romney has obviously felt that he needed to enlist the support of former Internal Revenue Service Commissioner Fred Goldberg to confirm that he has fully satisfied his responsibilities as a taxpayer.

“I have reviewed Governor and Mrs Romney’s joint tax return for 2010, including returns for the Ann and Mitt Romney Family Trust, the Ann D. Romney Blind Trust, and the W. Mitt Romney Blind Trust,” Goldberg confirmed. “I have also reviewed the return in process for 2011. These returns reflect the complexity of our tax laws and the types of investment activity that I would anticipate for persons in their circumstances."

"There is no indication or suggestion of any tax-motivated or aggressive tax planning activities,” he added. “In my judgment, they have fully satisfied their responsibilities as taxpayers.”

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