Romney tries to sidestep tax furor he ignited

Repub­li­can pres­i­den­tial can­di­date, for­mer Mass­a­chu­setts Gov. Mitt Rom­ney cam­paigns at Winthrop Uni­ver­sity in Rock Hill, S.C., Wednes­day, Jan. 18, 2012. (AP Photo/Charles Dharapak)

KASIE HUNT, TOM RAUM

Asso­ci­ated Press

SPARTANBURG, S.C. (AP) — Mitt Rom­ney tried doggedly Wednes­day to side­step the polit­i­cal furor he had started a day ear­lier by reveal­ing he pays fed­eral taxes at a rate of about 15 per­cent, less than mil­lions of middle-income Amer­i­can families.

Fac­ing a new con­tro­versy, his cam­paign con­firmed that Rom­ney has money invested in the Cay­man Islands but said he was not get­ting any tax break.

Newt Gin­grich, his main rival in this weekend’s South Car­olina pri­mary, poked at Rom­ney anew and dis­closed that his per­sonal tax rate is more than dou­ble that of Romney.

Just before Saturday’s South Car­olina vot­ing, Rom­ney is try­ing to wrap up his push for the Repub­li­can nom­i­na­tion, but it’s been any­thing but smooth. He’s spent nearly two weeks answer­ing ques­tions and crit­i­cism about his per­sonal wealth and tenure at Bain Cap­i­tal, the pri­vate equity firm he founded, and those sub­jects are sure to come up again in Thurs­day night’s debate.

Gin­grich slapped at the GOP front-runner, say­ing in Winns­boro that he him­self paid 31 per­cent of his income in taxes for 2010, more than twice what Rom­ney said he paid. Gingrich’s cam­paign said the 31 per­cent was the effec­tive fed­eral rate on income, appar­ently not includ­ing Social Secu­rity pay­roll taxes.

Gin­grich told reporters that he is not crit­i­ciz­ing Rom­ney for pay­ing a tax rate below what many wage-earning Amer­i­cans pay. Gin­grich has pro­posed a plan that would give Amer­i­cans the option of pay­ing a 15 per­cent flat tax — which he notes is the same rate Rom­ney is citing.

“My goal is not to raise Mitt Romney’s taxes but to let every­one pay Romney’s rate,” Gin­grich said.

Texas Gov. Rick Perry says he intends to push it anew on Thurs­day. “If Mitt Rom­ney intends to be our nom­i­nee, he needs to open up his tax records today, no later than tomor­row by debate time,” Perry told CNN on Wednesday.

There may be more fallout.

Romney’s cam­paign was con­fronted with new ques­tions about his finances Wednes­day when ABC News reported that Rom­ney has mil­lions of dol­lars of per­sonal wealth in invest­ment funds set up in the Cay­man Islands, known as a tax haven for Amer­i­cans. The report said that Rom­ney had the abil­ity to pay a lower tax rate by invest­ing in funds located offshore.

A spokes­woman for Romney’s cam­paign con­firmed that the Rom­neys have money in the Cay­mans. But the cam­paign did not say why. Spokes­woman Andrea Saul also said: “ABC is flat wrong. The Rom­neys’ invest­ments in funds estab­lished in the Cay­man Islands are taxed in the very same way they would be if those funds were estab­lished in the United States. These are not tax havens and it is false to say so.”

Aides to the for­mer gov­er­nor refused to expand on the infor­ma­tion, declin­ing to say how large his invest­ment is in the Cay­man Islands and why it is there, as opposed to in the U.S.

Nor would the cam­paign say whether Rom­ney has invest­ments any­where else out­side the United States. Advis­ers said Romney’s assets are man­aged on a blind basis and that he does not have con­trol over how they are managed.

Rom­ney also refused to answer repeated ques­tions from reporters about his Cay­man invest­ments dur­ing a stop at a bar­be­cue restau­rant in Lex­ing­ton. Out­side Hudson’s Smoke­house, Rom­ney sim­ply smiled for cam­eras as he pushed through the crowd and boarded his cam­paign bus.

While a sup­porter rushed to Romney’s defense, the for­mer Mass­a­chu­setts gov­er­nor tried to duck the issue entirely on Wednes­day, mak­ing no men­tion of his tax returns or tax rate dur­ing a rally at Wof­ford Col­lege here and declin­ing to take ques­tions from the news media. Instead, he deliv­ered his stan­dard cam­paign speech and assailed Gin­grich, who has been run­ning sec­ond in opin­ion polls in South Carolina.

Rom­ney aides, too, refused to com­ment about his tax returns or details of his tax rate when pressed. His cam­paign held a con­fer­ence call fea­tur­ing sur­ro­gates who tried to cast Gin­grich, the for­mer House speaker, as an unre­li­able leader, but the wealth and taxes issue showed no signs of going away.

At an event in Rock Hill, S.C., Rom­ney kept away from the issue of his taxes, but he crit­i­cized Repub­li­cans who “jumped on that band­wagon” of crit­i­ciz­ing free enter­prise. “My good­ness, I lis­tened to Speaker Gin­grich the other night talk about the enter­prises I’ve been asso­ci­ated with,” Rom­ney said. “I’m proud of the fact that I worked in the pri­vate sec­tor, that I’ve achieved success.”

New Jer­sey Gov. Chris Christie, who has endorsed Rom­ney, sought to help by defend­ing Romney’s tax sta­tus on TV. But that may have back­fired when Christie, on NBC’s “Today” show, sug­gested Rom­ney put out his tax returns “sooner rather than later.”

“It’s always bet­ter in my view to have com­plete dis­clo­sure, espe­cially when you’re the front-runner,” Christie said.

After months of resis­tance and under pres­sure from Repub­li­can pres­i­den­tial rivals, Rom­ney now says he will release tax infor­ma­tion for 2011 — but not until April, close to the tax fil­ing dead­line and when, pre­sum­ably, the GOP race will have been decided.

Rom­ney dis­closed for the first time on Tues­day that, despite his wealth of hun­dreds of mil­lions of dol­lars, he has been pay­ing in the neigh­bor­hood of 15 per­cent, far below the top max­i­mum income tax rate of 35 per­cent, because his income “comes over­whelm­ingly from invest­ments made in the past.” Dur­ing 2010 and the first nine months of 2011, the Rom­ney fam­ily had at least $9.6 mil­lion in income, accord­ing to a finan­cial dis­clo­sure form sub­mit­ted in August.

Fur­ther focus­ing atten­tion on his wealth was Romney’s off­hand remark to reporters that his income from paid speeches amounted to “not very much” money. In the August dis­clo­sure state­ment, he reported being paid $373,327.62 for such appear­ances for the 12 months end­ing last Feb­ru­ary, a sum that alone would him in the top 1 per­cent of U.S. taxpayers.

It recalled other polit­i­cally awk­ward moments for Rom­ney in which he unin­ten­tion­ally put a spot­light on his own wealth, includ­ing his offer to wage a $10,000 bet with Texas Gov. Rick Perry dur­ing a GOP debate last month over a dis­agree­ment on health care pol­icy. He also joked to a group of vot­ers that, since leav­ing Bain in 1999, he has been “unemployed.”

Rom­ney has been con­sol­i­dat­ing GOP sup­port before Saturday’s South Car­olina pri­mary in which a vic­tory could all but seal his nomination.

But the focus on his wealth is an unwanted dis­trac­tion for him as he seeks to win votes in a state where the unem­ploy­ment rate, at 9.9 per­cent, is among the high­est in the nation, and amid ris­ing pub­lic con­cern over income inequal­ity. Pres­i­dent Barack Obama’s cam­paign advis­ers con­tend vot­ers are unlikely to back a wealthy Repub­li­can with financial-industry ties at a time of lin­ger­ing eco­nomic distress.

And White House spokesman Jay Car­ney said Wednes­day that, “as a mat­ter of fair­ness, it does not make a lot of sense for mil­lion­aires and bil­lion­aires to be able to pay taxes at a much lower rate than some­body mak­ing $100,000 a year.”

The max­i­mum mar­ginal U.S. income tax rate of 35 per­cent applies — in the­ory more than prac­tice — to house­holds with tax­able income of over about $388,500.

But like many wealthy peo­ple, the Rom­neys have been helped by changes in fed­eral tax pol­icy that have placed much lower tax rates on invest­ment income — from div­i­dends, inter­est and cap­i­tal gains from the sale of stocks and other assets — than on wages and salaries, the source of income for most Americans.

Under the Bush-era tax cuts strongly sup­ported by most Repub­li­cans, such income, includ­ing gains on secu­ri­ties held for a year or longer, is sub­ject to a tax rate of 15 percent.

In addi­tion, the Rom­neys are able to claim another tax break because of his 15 years with Bain. Although he retired from there in 1999, Rom­ney is still able to ben­e­fit finan­cially from the firm’s prof­itable invest­ments and from “co-investment” deals in which he can invest along­side Bain.

A pro­vi­sion in the tax code treats prof­its earned by pri­vate equity funds such as Bain and hedge funds as “car­ried inter­est” — and thus sub­ject to the 15 per­cent cap­i­tal gains rate — rather than as ordi­nary income.

In addi­tion, only income up to $106,800 is sub­ject to the sep­a­rate pay­roll tax that funds Social Secu­rity and Medicare, so the wealthy often pay much lower effec­tive rates on their total income than other Americans.

Accord­ing to the con­gres­sional Joint Com­mit­tee on Tax­a­tion, an aver­age fed­eral tax rate of 15 per­cent — includ­ing both income and pay­roll taxes — would apply to house­holds with tax­able incomes of from $75,000 to $100,000.

Those with incomes below $94,000 earn less than 4 per­cent of their income from cap­i­tal gains, inter­est and div­i­dends, accord­ing to the Con­gres­sional Bud­get Office, while such invest­ment income rep­re­sents 43 per­cent of the income of house­holds earn­ing more than $1.87 mil­lion a year.

Obama and his wife paid fed­eral taxes of just over 25 per­cent of their 2010 income of $1.7 mil­lion, mostly from the books he’s written.

Perry and his wife paid roughly 24 per­cent of their 2010 income of $217,447.

Posted by AP News on Jan 18 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.