Romney releases long-awaited tax return

Republican presidential candidate Mitt Romney paid $1.9m in taxes on more than $13m in income in 2011, an effective tax rate of 14.1 per cent, his campaign has said.

The announcement was made on Friday ahead of the release of the full return and Romney’s 20-year summary, conducted by PricewaterhouseCoopers and made available for public view online.

Fighting back against Democratic party claims that he paid little or no taxes in earlier years, the Romney campaign also released a letter certifying he owed an average effective federal tax rate of 20.2 per cent over the 20-year period ending in 2009.

Democrats led by Senate Democratic Leader Harry Reid have suggested Romney paid scant taxes in those earlier years. Despite heavy political pressure, his campaign has refused to release earlier returns.

President Barack Obama and his Democratic allies have used Romney’s refusal to release more returns as evidence that he is an out-of-touch millionaire.

Romney, who faces Obama in the November 6 election, earns the majority of his income from investment profits, dividends and interest, which is taxed at a lower rate than income.

Romney’s campaign said the lowest annual federal personal tax rate he owed over the 20 years was 13.66 per cent.

Romney paid about $3m in federal income taxes in 2010 – or 13.9 per cent.

“He’s cleaning house, as he’s had a bad week – in fact he’s had a bad month,” said Al Jazeera’s Alan Fisher, reporting from Washington. “By getting it out now, it’s one less problem he has to worry about. Also, very few people read newspapers on a Saturday.”

“But the question is, why doesn’t he release tax returns going back before [2010 and 2011]?”

Investment income

In addition, Brad Malt, the trustee of the Romney’s blind trust, said in a blog post that “the Romneys donated $4,020,772 to charity in 2011, amounting to nearly 30 per cent of their income”.

“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 per cent in income taxes in each of the last 10 years,” Malt added.

Critics, including President Barack Obama, have urged Romney to follow his father’s model. When George Romney ran for president, he released 12 years of tax returns.

Mitt Romney is refusing. He has said he is following the example of Republican Sen John McCain, who released two years’ worth of returns in his race against Obama in 2008.

The vast majority of Romney’s income came from investments, which are taxed at a lower rate than wages. His total wealth has been estimated as high as $250m.

Obama’s tax return shows he earned nearly $790,000 last year and paid an effective tax rate of almost 21 per cent.

On average, the wealthy in the US pay higher income tax rates than those who make less.

Explaining rates

People making $1 million or more annually paid an average effective rate of 25 per cent last year in federal income and payroll taxes, according to the nonpartisan Tax Policy Center.

The White House has argued that even so, some millionaires end up paying lower rates than many of those earning less. That is largely because many wealthy people earn income from dividends that are taxed at just 15 per cent, instead of the top 35 per cent rate on salaries.

A report in October by the Congressional Research Service, an agency that conducts research for lawmakers, said about a quarter of those earning $1m or more per year – 94,500 taxpayers – had a lower tax rate than 10.4 million moderate-income people.

Romney proposes dropping all income tax rates by 20 per cent, reducing the top tax rate from 35 per cent to 28 per cent.

The bottom rate would go from 10 per cent to 8 per cent.

Romney says he would pay for the rate cuts by eliminating or reducing tax credits, deductions and exemptions, but will not say which ones would go.