WASHINGTON – Mitt Romney’s newly released tax returns represent an extraordinary accounting of the household finances and 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 Republicans, rivals, the media and the American public started to emerge Tuesday, as more than 500 pages from a 2010 tax return and a 2011 estimate spilled revelations about his holdings, tax strategies and charitable donations.
The details will make it even harder for Romney to fight the Democrats’ charge that he is out of touch with normal Americans as he fights for the chance to challenge President Barack Obama in November’s election.
Romney’s income puts him in the top 0.006 per cent of Americans, based on the most recent Internal Revenue Service data, from 2009. He could be worth up to $250 million, based on previously released financial information.
The returns released Tuesday outline the complex tactics used to reduce his effective tax rate close to the one paid by many middle-class Americans. New details include Romney’s continuing profits from the private equity firm he no longer runs, a Swiss bank account closed as Romney launched his campaign and investment funds set up in offshore locations, from the Caribbean to Ireland and Luxembourg.
The documents came out as Obama prepared to deliver his State of the Union message, in which he is expected to talk about economic fairness in a country where the recent Occupy protest movement against inequality coined the term “the 1 per cent” for the very rich.
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, Romney’s returns provide a window into an unfamiliar world.
“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, a former Massachusetts governor, paid about $3 million in federal income taxes in 2010 on an income of $21.7 million. He gave nearly $3 million to charity — about half of that to the Mormon Church — which helped lower his effective tax rate to a modest 14 per cent. His charitable giving is above average, even for someone at his income level.
Asked during TV interviews Tuesday about Romney’s tax rate, White House adviser David Plouffe said: “We need to change our tax code so that everybody is doing their fair share.”
Romney’s Republican rivals had no immediate comment. Top rival Newt Gingrich released his 2010 returns Thursday, showing he paid almost $1 million in income taxes, a tax rate of about 31 per cent.
Republican House Speaker John Boehner defended Romney’s tax rate. “We all know that there’s a reason we have low rates on capital gains,” he 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 offer a single year’s return in April. But 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 per cent, the campaign said.
His advisers acknowledged that he continues to earn money from investments from Bain Capital, the private equity firm he founded and managed until early 1999. Romney earned $7.5 million in Bain earnings in 2010, said Benjamin Ginsberg, the campaign’s legal counsel.
His advisers acknowledged Tuesday that Romney and his wife, Ann, had a Swiss bank account until Romney launched his presidential run. The account was worth $3 million and was held in the United Bank of Switzerland, said R. Bradford Malt, a Boston lawyer who oversees their blind trust, which was set up to avoid conflicts of interest in investments during the run for the presidency.
In 2009, UBS admitted assisting U.S. citizens in evading taxes.
Malt confirmed that some of Romney’s investments are routed through affiliate funds set up in the Cayman Islands, but he insisted there were no actual offshore accounts.
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.
Associated Press writers Kasie Hunt reported from Tampa and Stephen Ohlemacher from Washington.