US PRESIDENT Barack Obama could not have hoped for a better gift on the day he was to deliver his third state of the union address. Income equality was to be a key theme in the speech last night, and Mitt Romney’s newly released income tax returns were the perfect supporting document.
If Mr Romney’s advisers hoped the details of his wealth would be forgotten amid coverage of the president’s address, they were mistaken. The Republican presidential hopeful earned $42.5 million in 2010 and 2011, without holding a salaried job, while campaigning full time for the presidency.
Mr Romney will have paid $6.2 million in tax for the two years, an effective tax rate of 14.65 per cent. Many middle-class Americans pay 35 per cent of their income in taxes.
The disparity is explained by the fact Mr Romney derives his entire income from interest and investments. Returns on investments are taxed at 15 per cent. Mr Romney’s chief rival, former speaker of the house Newt Gingrich, would like to do away with tax on capital gains all together.
Democrats want to end the tax mechanism called “carried interest”, whereby hedge fund managers and partners in private equity firms pay 15 per cent rather than 35 per cent tax on the profits they receive as compensation, although they do not invest their own money. Over the past two years, Mr Romney received $13 million in “carried interest” from Bain Capital, the equity firm he cofounded in 1984 and which he left in 1999.
According to the Internal Revenue Service, the average US annual income was $33,048 in 2008, less than Mr Romney earns daily. To reach the top 1 per cent of taxpayers, who now possess 90 per cent of the country’s wealth, requires $380,354 in annual income – what Mr Romney earns in a week.
The documents, published yesterday on the Romney campaign website, can only strengthen the perception that Mr Romney is just not like other Americans.
As the candidate pointed out himself in a debate in Tampa, Florida, on Monday night, he has done nothing illegal.
“I pay all the taxes that are legally required and not a dollar more,” he said. “I don’t think you want someone as the candidate for president who pays more taxes than he owes.”
By comparison, the president and his wife Michelle earned $1.8 million in 2010, on which they paid an effective tax rate of 26 per cent. Mr Gingrich and his wife Callista earned $3.16 million, and paid 31.6 per cent in taxes.
The 550 pages of documents released by the Romney campaign were divided into six sections: Mitt and Ann Romney’s 2010 taxes; their estimated taxes for 2011; taxes on three blind trusts belonging to each of them and their children; and documentation for the charitable Tyler Foundation created by the Romney family, in part to fight multiple sclerosis, a disease that afflicts Mrs Romney.
Brad Malt, who oversees the Romney trusts, and Fred Goldberg, a former commissioner for the Internal Revenue Service, held an hour-long telephone conference call with journalists to explain the tax documents.
“Twenty-six people from the Chicago area are listening in on our call today,” Mr Malt said. Mr Obama’s re-election campaign has its head-quarters in Chicago.
“That sums up the state of play,” Mr Malt added.
Mr Goldberg said he had examined the returns and found “no indication or suggestion of any tax-motivated or aggressive tax planning activities”, adding the Romneys “fully satisfied their responsibilities as taxpayers.”
The Romneys had no involvement in his decisions regarding the investment of their money, Mr Malt said. This included a $3million account that he opened with the Union Bank of Switzerland on their behalf in 2003.
“It is an ordinary bank account,” Mr Malt said. “It earned something around $1,700 in interest, which is reported. The tax is fully paid, as if it were a US account. I closed it in early 2010.”
Mr Malt insisted other overseas holdings were investments, not accounts. These included money in Ireland, the Cayman Islands and Luxembourg.
The pro-Obama group Citizens United for Change this week posted a YouTube video of two men in business suits sitting in beach chairs and staring at the Caribbean. “Believe in America,” it says, borrowing Mr Romney’s campaign slogan. “Hide your money in the Caribbean.”