Romney’s mountain of wealth could cast loud echo

Repub­li­can pres­i­den­tial can­di­date, for­mer Mass­a­chu­setts Gov. Mitt Rom­ney ges­tures dur­ing a Repub­li­can pres­i­den­tial debate Mon­day, at the Uni­ver­sity of South Florida in Tampa, Fla. (Asso­ci­ated Press | Paul Sancya)

JACK GILLUM

STEPHEN BRAUN

Asso­ci­ated Press

WASHINGTON — Mitt Romney’s newly released tax returns rep­re­sent an extra­or­di­nary account­ing of the house­hold finances and far-reaching 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 Repub­li­can tax­pay­ers, rival cam­paigns, the media and the Amer­i­can pub­lic only started to emerge Tues­day, as more than 500 pages from a 2010 tax return and a 2011 esti­mate spilled out both sig­nif­i­cant and minor rev­e­la­tions about Romney’s scat­tered hold­ings, tax strate­gies and char­i­ta­ble donations.

The returns out­line both the dimen­sions of Romney’s finances and the com­plex­ity of the tac­tics used to reduce his effec­tive tax rate close to the low 15 per­cent paid by many middle-class Amer­i­cans. Among the new details con­tained in the doc­u­ments are Romney’s con­tin­u­ing prof­its from the pri­vate equity firm he founded but no longer runs, a Swiss bank account closed just as Rom­ney launched his White House run and new list­ings of invest­ment funds that were set up in off­shore loca­tions from the Caribbean to Ire­land and Luxembourg.

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 who are just begin­ning to grap­ple with their lat­est returns as tax sea­son looms, Romney’s multimillion-dollar returns pro­vide a win­dow into an unfa­mil­iar world.

Tax law experts famil­iar with the for­mi­da­ble finan­cial port­fo­lios of invest­ment fund man­agers said Romney’s returns would at the very least rein­force the ris­ing pub­lic issue of income inequity.

“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 paid about $3 mil­lion in fed­eral income taxes in 2010, hav­ing earned more than seven times that from his invest­ments. That income, $21.7 mil­lion, put him among the wealth­i­est of Amer­i­can tax­pay­ers. Romney’s cam­paign said Tues­day he fol­lowed all tax laws.

At the same time, Rom­ney gave nearly $3 mil­lion to char­ity — about half of that amount to the Mor­mon Church — which helped lower his effec­tive tax rate to a mod­est 14 per­cent, accord­ing to records his cam­paign released Tuesday.

Romney’s income puts him in the top 0.006 per­cent of Amer­i­cans, based on the most recent Inter­nal Rev­enue Ser­vice data, from 2009. That year, only 8,274 fil­ers reported income above $10 million.

He could be worth up to $250 mil­lion, based on pre­vi­ously released finan­cial information.

The doc­u­ments were released as Pres­i­dent Barack Obama pre­pared to deliver his State of the Union mes­sage, in which he is expected to talk about eco­nomic fairness.

Asked dur­ing a round of TV inter­views Tues­day about Romney’s tax rate, given that he’s a mul­ti­mil­lion­aire, White House adviser David Plouffe said: “We need to change our tax sys­tem. We need to change our tax code so that every­body is doing their fair share.”

Other Demo­c­ra­tic Party voices were less restrained. “He used every loop­hole in the book avail­able to the wealthy and cor­po­ra­tions to avoid pay­ing his fair share,” said Demo­c­ra­tic National Com­mit­tee Exec­u­tive Direc­tor Patrick Gaspard.

Romney’s GOP rivals had no imme­di­ate com­ment. But House Speaker John Boehner, R-Ohio, defended the Romney’s tax rate as being close to what most Amer­i­cans pay on long-term cap­i­tal gains from the sale of investments.

“We all know that there’s a rea­son we have low rates on cap­i­tal gains,” Boehner 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 only offer a sin­gle year’s return in April. But mount­ing 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 per­cent, the cam­paign said. Those returns haven’t yet been filed yet.

In total, he would pay more than $6.2 mil­lion in taxes on $45 mil­lion in income in the past two years, his cam­paign said.

“Gov. Rom­ney has paid 100 per­cent of what he owes,” said Ben­jamin Gins­berg, the Rom­ney campaign’s legal coun­sel. Gins­berg and other advis­ers insisted Rom­ney did not use any aggres­sive tax strate­gies to help reduce or defer his tax income.

The advis­ers acknowl­edged that Rom­ney con­tin­ues to earn money from invest­ments from Bain Cap­i­tal, the Boston-based pri­vate equity firm the can­di­date founded and man­aged between 1984 and early 1999. Under an agree­ment with the firm when he left, Rom­ney con­tin­ued to earn “car­ried inter­est” on new Bain invest­ments as a for­mer part­ner in the firm even though he no longer ran the operation.

Rom­ney earned $7.5 mil­lion in Bain earn­ings in 2010 and expects to make $5.5 mil­lion in 2010, Gins­berg said.

The for­mer Mass­a­chu­setts gov­er­nor had been cast by his GOP oppo­nents as a wealthy busi­ness­man who earned lucra­tive pay­outs from his invest­ments while Bain slashed jobs in the pri­vate sec­tor. Rival Newt Gin­grich released his 2010 returns last Thurs­day show­ing he paid almost $1 mil­lion in income taxes, a tax rate of about 31 percent.

Romney’s advis­ers acknowl­edged Tues­day that Rom­ney and his wife, Ann, had a bank account in Switzer­land as part of her trust. The account was worth $3 mil­lion and was held in the United Bank of Switzer­land, said R. Brad­ford Malt, a Boston lawyer who makes invest­ments for the Rom­neys and over­sees their blind trust, which was set up to avoid any con­flicts of inter­est in invest­ments dur­ing his run for the presidency.

In 2009, UBS admit­ted assist­ing U.S. cit­i­zens in evad­ing taxes, and agreed to pay a $780 bil­lion penalty as part of a deferred pros­e­cu­tion agree­ment with the U.S. Jus­tice Department.

Malt said he closed the account in early 2010 for “diver­si­fi­ca­tion” and because it “just wasn’t worth it.” He side­stepped a ques­tion about whether he did so because the account could have been a polit­i­cal lia­bil­ity, say­ing it “might or might not be incon­sis­tent with Gov. Romney’s polit­i­cal views.” Malt has sold off other accounts in recent years — includ­ing invest­ments in firms that did busi­ness with Iran and China — because of pos­si­ble polit­i­cal incon­sis­tency or embar­rass­ment with Romney’s polit­i­cal positions.

Malt also con­firmed that some of Romney’s invest­ments are routed through affil­i­ate funds set up in the Cay­man Islands. He insisted there were no actual off­shore accounts, and added that Rom­ney paid the same amount of U.S. taxes using the Cay­man affil­i­ates as he would have if the invest­ment funds were set up in the U.S.

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.

The returns showed about $4.5 mil­lion in item­ized deduc­tions, includ­ing $1.5 mil­lion to the Church of Jesus Christ of Latter-Day Saints.

Romney’s char­i­ta­ble giv­ing is above aver­age, even for some­one at his income level. In 2009, more than 37 mil­lion fil­ers claimed char­i­ta­ble deduc­tions aver­ag­ing more than $4,000. Among those mak­ing more than $10 mil­lion, the aver­age char­i­ta­ble deduc­tion was about $1.7 mil­lion, accord­ing to the IRS.

Before the tax records were released, Romney’s old invest­ments in two government-backed hous­ing lenders stirred up new ques­tions at the same time his cam­paign tar­geted Gin­grich for his work for Fred­die Mac.

Gin­grich earned $1.6 mil­lion in con­sult­ing fees from Fred­die Mac. Rom­ney has as much as $500,000 invested in the U.S.-backed lender and its sis­ter entity, Fan­nie Mae.

The fight over releas­ing the tax infor­ma­tion high­lighted an argu­ment that Democ­rats are already start­ing to use against Rom­ney — that he is out-of-touch with nor­mal Amer­i­cans. And it prob­a­bly hurt him in the South Car­olina pri­mary, where he lost by 12 per­cent­age points to Gin­grich after spend­ing sev­eral days resist­ing calls to release the returns.

Posted by AP News on Jan 24 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.