Does Mitt Romney Pay Any Income Tax?
As Mitt Romney's fellow Republicans intensify their calls for the GOP presidential primary frontrunner to release his tax returns, which past nominees of both parties have historically done, there has been widespread speculation that Romney's refusal to do so indicates he likely paid a low tax rate on his millions of dollars in annual income. But the real question isn't whether Mitt Romney has paid little in taxes on his millions of dollars in income over the past several years. The question is whether he's paid anything. We already know Romney pays a very low effective tax rate on his multi-million dollar income; he has essentially admitted as much. Time's Michael Scherer offered one estimate of Romney's likely tax rate last year:
Calculating the Romneys' exact tax burden is not possible from the public records because of a number of factors, like the amount of money that Romney deducted from his taxes and the length of time that he owned investments, are unknown. But ballpark estimates are possible. Assuming that Romney declared roughly the same number of deductions as others in his income level and that his dividend and capital gains income qualified for the 15% bracket, Romney would have paid roughly 14% of his gross income in taxes to the federal government in 2010 according to Bob McIntyre, who crafts tax policy at the left-leaning Citizens for Tax Justice.
That 14 percent effective tax rate is less than the effective rate paid by a typical taxpayer earning $60,000 a year. And that's the baseline estimate of Romney's income tax payments, based on the assumption that his deductions were typical for people at his income level. It's extremely unlikely that his effective rate is much higher than 14 percent — remember, according to Romney himself, all his income is from capital gains, dividends and interest. But Romney's effective tax rate could be lower — perhaps even much lower. In 2009, nearly 1,500 million-dollar earners managed to avoid paying any income tax at all. ABC News explained how:
According to a recently released IRS report, almost 1,500 of America's 230,000 millionaires avoided paying any federal income tax in 2009.
So how did they do it? Were they scamming the system? Evading the IRS? Stashing their cash in elusive off-shore, untraceable bank accounts?
Actually, they were probably donating to charity, investing in local and state government bonds and making most of their money overseas. [...]
For example, a couple that earns $2 million could pay no U.S. income tax if they donated $1 million to charity, making that half of their income non-taxable; if they earned most of their income from capital gains or dividends, which are taxed at a lower rate; and if they paid taxes on overseas investments, thereby qualifying for a foreign tax credit.
Now, compare Mitt Romney to that hypothetical couple: We know Romney donates a lot of money to charity. We know he earns most of his income in capital gains and dividends. And we know he's benefitted from overseas investments.
So why won't Mitt Romney release his returns? Even without them, we can be certain that Romney pays a low effective tax rate on his millions of dollars in income — likely no more than 15 percent — making him a walking, talking example of a system rigged in favor of the already-wealthy. If Romney is hiding the fact that he pays a lower tax rate than teachers and bus drivers, he's hiding what we already know. So maybe he's hiding something even more embarrassing — maybe he's managed in at least one recent year to avoid paying any income tax at all, like some similar millionaires have been able to do? It's a long shot, but it's possible — and it would certainly explain his reluctance to release his returns.