Romneys paid $1.94 million in federal taxes for 2011

By TOM RAUM, Associated Press Published: Sep 21, 2012 at 2:57 PM PDT
Romneys paid $1.94 million in federal taxes for 2011
Mitt Romney
WASHINGTON (AP) - Mitt Romney, one of the wealthiest candidates ever to seek the presidency, paid nearly $2 million in federal taxes on the $13.7 million in income reported for himself and his wife last year, his U.S. returns showed Friday. That comes to an effective tax rate of 14.1 percent, lower than millions of middle-income Americans but actually more than he had to pay.

Most of Romney's income was from investment returns. That is why his rate was lower than taxpayers whose income was mostly from wages, which can be taxed at higher rates.

Romney's taxes have emerged as a key issue during the 2012 presidential race with President Barack Obama. Romney released his 2010 returns in January, but he continues to decline to disclose returns from previous years - including those while he worked at Bain Capital, the private equity firm he co-founded.

The Obama campaign and other Democrats have pushed for fuller disclosures, reminding the Republican candidate that his father, George Romney, released a dozen years of returns when he ran for president.

There also has been Democratic criticism of Romney's foreign investments. Several tax law experts said Friday that his newly released tax returns would not be much help in resolving critics' questions about his sprawling finances - whether he used aggressive tax-deferral strategies, what might be the specifics and tax advantages of his numerous offshore investments, what was the source of his massive retirement account and what are the details behind his now-closed $3 million Swiss bank account.

Apparently hoping to resolve basic questions voters might have, the Romney campaign also released a letter from his accountants saying that in the 20 years prior to 2010 the Romneys paid an average annual effective rate of 20.2 percent, never lower than 13.66 percent. On average, middle-income families - those making from $50,000 to $75,000 a year - pay 12.8 percent of their income in federal taxes, according to Congress' Joint Committee on Taxation. But many pay a higher rate.

The former Massachusetts governor, whose wealth is estimated at perhaps $250 million, is aggressively competing with Obama for the support of middle class voters.

Obama's own tax return for last year showed that he and his wife, Michelle, paid $162,074 in federal taxes on $789,674 in adjusted gross income, an effective tax rate of 20.5 percent. Their income plunged from $1.7 million in 2010, with declining sales of the president's books. In 2009, the Obamas reported income of $5.5 million, fueled by the best-selling books.

The Romneys' tax bill could have been lower.

For the year, they claimed a deduction for $2.25 million of their $4.021 million in charitable contributions, said Brad Malt, trustee of the candidate's blind trust. They could have claimed more, Malt said, but the couple "limited their deductions of charitable contributions to conform to the governor's statement (n August, based on the January estimate of income, that he paid at least 13 percent in income taxes in each of the last 10 years."

Romney seemed to be painted into a corner by that statement, which came in reaction to Democratic Senate Majority Leader Harry Reid's claim to have heard that the Republican had paid no taxes in some years.

Romney will surely be reminded by the Democrats that he also said in August, defending his right to pay no more taxes than he owed: "I don't pay more than are legally due, and frankly if I had paid more than are legally due I don't think I'd be qualified to become president."

He appears to be physically qualified by any measure.

The campaign released a separate report Friday - by Romney's longtime physician, Dr. Randall Gaz of Massachusetts General Hospital - that said he is healthy and ready to meet the rigorous demands of the presidency.

The report said Romney's heart appears healthy, and he takes a baby aspirin and medicine to treat high cholesterol to help keep it that way. He doesn't smoke or drink. And his resting heart rate is a low 40 beats per minute, in the range of well-trained athletes and reminiscent of President George W. Bush, who also had a low resting rate.

Romney is 6 feet 1½ inches tall and weighs 184 pounds.

As for his taxes, the Romneys' 2011 rate was slightly above the 13.9 percent effective rate they paid for 2010 when their federal tax bill was about $3 million.

They paid federal taxes of $1,935,708 on income of $13,696.951 for last year, according to the returns filed Friday with the Internal Revenue Service. They had obtained a filing extension beyond the usual April 15 tax deadline. His campaign earlier estimated that he would pay about $3.2 million in taxes for the year, well above the $1.9 million actually paid.

Most of Romney's income is from investments held in a blind trust, and campaign aides have stressed that he makes no decisions on how his money is invested.

Most of the income for the year came from investments, which are now generally taxed at 15 percent whereas the top marginal rate for income from wages is 35 percent.

The Romneys reported $6.8 million in capital gains, such as from the sale of stocks and other securities, and $6.37 million from dividends and taxable interest.

Romney's vast fortune and his long association with Bain Capital have been much discussed this year.

Analysts said details about his investments could emerge only if Romney provided far more of his tax returns - including files dating back to his years at Bain, the private firm he left in 2001. Romney, who initially refused to disclose any tax returns, has drawn the line at providing those from the past two years.

"All the important compliance and policy questions relating to Romney's personal tax matters relate to the past," said Edward D. Kleinbard, a law professor at the University of Southern California and former chief of staff of Congress' Joint Committee on Taxation. "The issue has never been Romney's 2011 tax return - in fact, it is a distraction to the real issues."

Only multiple returns would provide details about Romney's $100 million retirement account and how it grew, Kleinbard said. He also earlier returns would be crucial in knowing how often he paid gift tax on family trusts.

Joseph Bankman, a Stanford University law school professor and expert on tax law, said, "It's the Bain years we'd really need to know to have a full assessment of his tax strategies." Bankman said that the 2010 and 2011 returns "only raised these questions, but they can't provide real answers."

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Associated Press writers Stephen Braun, Stephen Ohlemacher, Kasie Hunt and Philip Elliott contributed.