Friday News Dump: Romney’s 2011 Tax Return

Artificially boosts his tax rate so his 13% claim would be true
Politics • Views: 37,213

It’s Friday, the day when people in the news release information they want to bury as much as possible, and that means Mitt Romney has finally released one year of tax returns: Romney’s Tax Return Comedy.

We’ll be poring over the actual returns soon, but an initial release from the Romney campaign has already told us a couple of amusing things.

First, Mitt and Ann Romney donated a whole heck of a lot of money to charity in 2011 — $4,020,772, to be exact, or about 30 percent of their total income. But they chose only to claim $2.25 million of that total as charitable deductions, because, well, otherwise, their overall tax burden would been a little, shall we say, light.

From the campaign:

The Romneys’ generous charitable donations in 2011 would have significantly reduced their tax obligation for the year. The Romneys thus limited their deduction of charitable contributions to conform to the Governor’s statement in August, based upon the January estimate of income, that he paid at least 13% in income taxes in each of the last 10 years.

Without claiming the total legally possible deduction, Romney ended up paying an effective tax rate of 14.1 percent. If he’d claimed everything he had a right to, he would only have paid around 9 percent.

There’s something both hilarious and pathetic about a presidential candidate manipulating his deductions so he ends up paying what he considers a more politically appropriate tax rate. But it’s especially ludicrous n light of Romney’s numerous claims that he’s always paid the government exactly what he owes, “and not a dollar more,” implying that anyone who voluntarily gave the government more than he legally owed was either a fool or a moron.

Romney is even on record declaring that the act of paying more than he owed would mean he shouldn’t be eligible for the presidency!

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37 comments
1 AK-47%  Fri, Sep 21, 2012 12:12:31pm

He cannot even release his taxes without shooting himself in the foot? That takes talent, the sort of talent that would be wasted on the Presidency: he is destined for Higher Things...

2 lawhawk  Fri, Sep 21, 2012 12:12:34pm

Funny that they didn't wait until 5pm so that it would miss the early PM news cycle.

They can't even get a Friday night news dump done right/

Seriously though, the contents of the information is somewhat enlightening - as much for what it says as much as what it doesn't say (and reposted from below):

That's a lower percentage than what most Americans pay, but not by all that much. In fact, he's cut his tax obligations significantly other more than those within his same income bracket.

USA Today ran an article earlier this year about the effective tax rates and how they differ from the bracketed rates:

The effective tax rate, meanwhile, is the amount a taxpayer pays in taxes as a percentage of total income. The average effective federal tax rate for American taxpayers is 11%, according to an analysis of 2009 IRS data by the Tax Foundation, a non-profit research organization. For individuals with adjusted gross income of $50,000 or less, the average effective tax rate is less than 5%, according to the Tax Foundation.

That rate doesn't include the amount taxpayers pay in Social Security and Medicare taxes.

Confusion about the difference between marginal and effective tax rates often causes taxpayers to overestimate their tax liabilities, tax professionals say. Francis Degen, an enrolled agent based in Setauket, N.Y., says a retired client recently asked him whether withdrawing some money from his savings to pay for a trip to Italy would bump him into a higher tax bracket. The client feared that all his income would be taxed at the higher rate, Degen says.

While Romney's effective tax rate is higher than the national average, it's lower than the percentage paid by most high-income taxpayers. The average effective tax rate for taxpayers with AGI of $1 million or more is 25%, according to the Tax Foundation analysis.

Former House Speaker Newt Gingrich said this week that his effective tax rate was 31% in 2010.

So, even when compared to the peer group (those with AGI over $1 million), Romney's effective rate is far lower than what can be expected. That's probably a result of his reliance on capital gains, plus charitable deductions to lower the effective rate.

For him to average that 20.20% over the period in question, it shows his reliance on the capital gains rates and charitable deductions to bring his tax position as low as it is.

3 Mr. Crankypants  Fri, Sep 21, 2012 12:13:03pm
There’s something both hilarious and pathetic about a presidential candidate manipulating his deductions so he ends up paying what he considers a more politically appropriate tax rate. But it’s especially ludicrous n light of Romney’s numerous claims that he’s always paid the government exactly what he owes, “and not a dollar more,” implying that anyone who voluntarily gave the government more than he legally owed was either a fool or a moron

Internal consistency is for libtards.

4 Targetpractice  Fri, Sep 21, 2012 12:13:50pm

We get a full year where he paid more than obligated, something he said would disqualify him for the presidency if he ever did it, and a notarized letter saying that his effective federal tax rate was never below 13%. Yeah, not income tax rate, but the rate after all the taxes he paid was combined.

God, what a joke.

5 HappyWarrior  Fri, Sep 21, 2012 12:14:16pm

Does he seriously think this is going to help? Really the time to release these was earlier before he made an ass of himself after Libya and his contempt for half the country was shown.

6 Obdicut  Fri, Sep 21, 2012 12:14:23pm

re: #3 Mr. Crankypants

Internal consistency is for libtards.

This is the really hilarious thing to me. He really did say that. It's among the many stupid things he's said about who qualifies for president-- his VP doesn't fit his business qualifications metric, for example-- but this one is a doozy. He just flat out said that he'd be an idiot to pay more and it'd make him unfit for the presidency, and then he went ahead and did exactly that.

It's like he's taunting America.

7 wrenchwench  Fri, Sep 21, 2012 12:16:29pm
8 Targetpractice  Fri, Sep 21, 2012 12:16:34pm

re: #5 HappyWarrior

Does he seriously think this is going to help? Really the time to release these was earlier before he made an ass of himself after Libya and his contempt for half the country was shown.

My guess is he thinks that he can now avoid accusations that he's part of the 47%, that he's "got skin in the game" and so doesn't come off as a rich wanker.

If that was his aim, he missed by a mile.

9 Charles Johnson  Fri, Sep 21, 2012 12:16:49pm

His "charitable" contributions consist of tithing to the Mormon Church, and as I've discussed before I think it's dishonest to call this charity because: 1) it's required for Mormons to tithe, and 2) the Mormon church uses this money for lots of non-charitable things, like opposing gay marriage legislation.

10 CarleeCork  Fri, Sep 21, 2012 12:16:57pm

Why should he pay a lower rate when none of his income came from actually working?

It's not right, it's terribly wrong.

11 wrenchwench  Fri, Sep 21, 2012 12:18:04pm
12 Targetpractice  Fri, Sep 21, 2012 12:18:14pm

re: #10 CarleeCork

Why should he pay a lower rate when none of his income came from actually working?

It's not right, it's terribly wrong.

His "working," AFAIK, has been doing the odd speaking gig or consulting fee. Man's primarily living off the shitload of money he makes with his investments.

13 Lidane  Fri, Sep 21, 2012 12:20:24pm
14 jc717  Fri, Sep 21, 2012 12:20:32pm

re: #2 lawhawk

For him to average that 20.20% over the period in question, it shows his reliance on the capital gains rates and charitable deductions to bring his tax position as low as it is.

Lies, damn lies, and statistics....
Did they mean mean, median, or mode?
Why pick 20 years?
Prior to the Bush tax cuts, the top long term/carried interest cap gains rate was 25%, the dividend tax rate was 39.6%.

I'd love to see what Romney's taxes were since the Bush tax cuts...

15 AK-47%  Fri, Sep 21, 2012 12:20:57pm

re: #9 Charles Johnson

His "charitable" contributions consist of tithing to the Mormon Church, and as I've discussed before I think it's dishonest to call this charity because: 1) it's required for Mormons to tithe, and 2) the Mormon church uses this money for lots of non-charitable things, like opposing gay marriage legislation.

But it is the law, and it is all about obeying the law and paying all the taxes required by law...

16 Obdicut  Fri, Sep 21, 2012 12:21:06pm

re: #10 CarleeCork

The lower rate for capital gains tax is supposed to help account for inflation, because otherwise long-term investment would be penalized. Unfortunately, this has the effect of giving a huge tax break to short-term investors. It'd be much better if the capital gains tax was tied to inflation, so that you paid normal tax minus inflation on your capital gains tax.

But since we don't have that, what we're left for is the uncomfortable position where an actual working schlub is taxed more than the guy who owns the factory he schlubs in.

17 lawhawk  Fri, Sep 21, 2012 12:21:33pm

A couple further points. The USA Today item I linked to indicates that for individuals with adjusted gross income of $50,000 or less, the average effective tax rate is less than 5%, according to the Tax Foundation, but that rate doesn't include the amount taxpayers pay in Social Security and Medicare taxes.

Those SSI and Medicare taxes disproportionately hit those with incomes under $110,000. In other words, only the first ~$110k is hit with those taxes. So someone making $1 million sees the SSI taxes taken on the first ~$110k, while someone making $50k would see the SSI taxes on the entire $50k. It would represent a bigger bite of the $50k taxpayer's income than the $1 million taxpayer's income.

To those amounts, you would have to add 4.2% for SSI and 1.45% for Medicare taxes withheld. That would push the person in the $50k position from a 5% effective tax rate to 10.65%.

18 JamesWI  Fri, Sep 21, 2012 12:22:03pm

Intrade stocks: Obama up to 72%, Romney plummeting to 28%

19 Obdicut  Fri, Sep 21, 2012 12:23:03pm

re: #18 JamesWI

Intrade stocks: Obama up to 72%, Romney plummeting to 28%

One of the interesting things that Nate Silver noticed is that there have been wide discrepancies in different betting marketplaces in terms of predicting the odds, something that shouldn't happen with an efficient market.

20 darthstar  Fri, Sep 21, 2012 12:23:23pm

Okay, now how about those other ten years?

21 lawhawk  Fri, Sep 21, 2012 12:24:04pm

re: #16 Obdicut

Except that short term cap gains are taxed at the taxpayer's bracket rate, not the long term rate (for items held 1 year or longer). That is meant to discourage short term investments and favor long term investments.

22 dragonfire1981  Fri, Sep 21, 2012 12:25:01pm

So now I want to know why he waited so long.

Why did this become such an issue in the first place?

23 Gus  Fri, Sep 21, 2012 12:25:18pm

re: #20 darthstar

Okay, now how about those other ten years?

Poor Mitt.

//

24 Obdicut  Fri, Sep 21, 2012 12:27:03pm

re: #21 lawhawk

I don't think one year should actually qualify as a long-term investment. I'm not using short-term investment as defined by taxes, but defined by its effect on the economy. The privilege given to short-term gains-- say, buying a company getting it to take on huge amounts of debt, paying out massive dividends to yourself and to the management team you own and paying back the purchase price, and then selling the remaining debt-laden shell, over the course of a few years-- distorts the financial markets and makes that a sweet spot-- anything longer than a year, but as close to as can be is the most profitable way to do business, all other things being equal.

This is one of the reasons we've got so many short-term bad decisions being made about labor and re-investment of capital. It's getting worse, too.

25 lawhawk  Fri, Sep 21, 2012 12:29:12pm

re: #9 Charles Johnson

The Tax Code (IRC) doesn't distinguish between tithing and other charitable giving. As long as the amounts are given to a charitable enterprise (501(c)(3), etc.) the donations will offset tax obligations.

You can make a good argument that tithing shouldn't qualify, but that's not the way the IRC is currently written.

But the fight over charitable giving is far from over. There are ongoing issues against church groups that are violating restrictions by pushing political activities and endorsing political parties or specific candidates in violation of the IRC. Those that do should lose their charitable status (and with them, the donations that are pegged as charitable donations).

26 darthstar  Fri, Sep 21, 2012 12:30:04pm

Sarah Silverman's voter PSA...must watch.

"But I have a purple heart!"
"So what, I have a yellow discharge!"

And watching nana accidentally fire the gun is kind of cute, too.

27 lawhawk  Fri, Sep 21, 2012 12:31:19pm

re: #24 Obdicut

It's an interesting point, but I haven't seen any kind of analysis on the tax outcomes or effect on the economy if the short term/long term threshold was lengthened from one year to say 3 or 5. Might be interesting to examine. But that would add additional complexity to the Code, especially if one were to phase in the changes.

28 Obdicut  Fri, Sep 21, 2012 12:35:58pm

re: #27 lawhawk

Yeah, as I said, the really good way to do it would be tied to inflation, but obviously that would get gamed too and you'd have to account for that. It certainly wouldn't simplify.

But anyway, at this point and time the capitalist end of the spectrum is aggregating wealth far faster than the labor end, and the system is going to get stuck. I ain't afraid to say that we need to redistribute that wealth. I don't think blunt taxation is the best way to do it, but certainly higher tax on investment income is a part of that, even if we just do the Obama idea and put it on incomes of a million and above.

The proposed financial transaction tax would also help, but that's so far outside my realm of understanding I can't really say much about that. Seems like it might be problematically gameable too.

29 Ojoe  Fri, Sep 21, 2012 12:45:39pm
implying that anyone who voluntarily gave the government more than he legally owed was either a fool or a moron.

Bean Ass Howe the Gov't has recently used my tax dollars to bail out failed investment bankers, and so forth, I would have to agree with that.

30 krypto  Fri, Sep 21, 2012 12:59:33pm

To be fair, Team Romney not only finally released his real 2011 return, but also offered unprovable assurances that Mitt paid at least 13%+ as his tax rate in all the other years.

Of course, we just have their word for that, because he won't release more than those two years of tax returns. And no one can know what sorts of marginally legal tax shelters and tricks he may have used to avoid taxes, for the same reason.

31 joe g.  Fri, Sep 21, 2012 1:04:27pm

The greatest thing about the Romney candidacy is the way that Romney personifies what is wrong with our income distribution and tax code, and makes the point in a way that studies and statistics never could. Here is one of our only two real contenders for the presidency. Everything he does is front page news. He made a bajillion dollars last year and he had to fudge the numbers to artificially inflate his tax rate, and it's still about half of the rate your average wage worker is paying. That's going to hit home much more powerfully than bar graphs about income distribution or arguments about whether capital gains tax is double taxation.

32 Patricia Kayden  Fri, Sep 21, 2012 1:16:22pm

@1 AK-47%

Ha! Romney's a gaffe machine. President Obama couldn't have gotten a better opponent if he had created him himself.
If he has nothing to hide, why doesn't Romney release 12 years of tax returns instead of just 2 and a summary of 20 years?

33 philosophus invidius  Fri, Sep 21, 2012 1:19:18pm

If he made $13.7 Million, wouldn't the tithe require him to give only $1.37 Million to the Church? Doesn't that mean that the other $2.6 million was fully voluntary charity?

34 Charles Johnson  Fri, Sep 21, 2012 1:34:03pm

re: #25 lawhawk

Yeah, I know it's legal - that wasn't my point. It bothers me that Romney uses his Mormon tithing to portray himself as a charitable person, when he's required to do it and when the money is used for things that are anything but charitable.

35 ozbloke  Fri, Sep 21, 2012 4:02:43pm

Deferring ones deductions does not equal not not claiming them.
Which I think shows how dumb he thinks the people of America are.

36 MikeTheModerateDemocrat  Fri, Sep 21, 2012 6:08:47pm

Reasonable to deduce at this point that the best case scenario behind these undisclosed returns is that he DID claim all of his deductions in the past, thereby paying 8-9 percent?

37 Dire Straits  Sat, Sep 22, 2012 7:53:15am

The whole tax returns is a non issue.


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