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The disclosure of his federal taxes in 2010 and 2011 came after a barrage of pressure on him to release his returns -- which he had never done, even when he was elected governor of Massachusetts.
Mitt Romney's campaign released hundreds of pages of tax documents on Tuesday -- providing an inside glimpse into Mr. Romney's sprawling investments, both in the United States and abroad -- in an effort to dampen the attacks on his wealth that have become a central focus of the Republican presidential nominating battle.
Mr. Romney and his wife, Ann, had an effective federal income tax rate in 2010 of 13.9 percent, paying about $3 million in taxes on an adjusted gross income of $21.6 million. The vast majority of their income flowed from myriad stock holdings, mutual funds and other investments, including profits and investment income from Bain Capital, the private equity firm Mr. Romney retired from in 1999.
That rate will rise to 15.4 percent for 2011, when the couple expects to report an adjusted gross income of about $20.9 million.
Both rates are much lower than the rates paid by either President Barack Obama or Newt Gingrich, Mr. Romney's Republican rival, who released his tax returns last week. His tax burden was also substantially less than someone of his wealth and income would pay in Britain, France or many other European countries.
Mr. Romney's own tax proposals would cut his federal income taxes by about 40 percent -- but Mr. Gingrich's proposal, which would abolish capital gains taxes, would almost entirely eliminate them.
The documents were posted on Mr. Romney's Web site on Tuesday after days of escalating political pressure on Mr. Romney from the other Republican candidates, Democrats and even his own supporters. Some of his backers had blamed Mr. Romney's shifting and tentative responses to questions about his wealth, tax burden and overseas income for his loss in the South Carolina Republican primary.
With the potentially decisive Florida primary just days away, Mr. Romney pivoted quickly to make the documents public.
The 547 pages of documents included 2010 federal income tax returns for the Romneys, the couple's estimated 2011 return and returns for their charitable foundation and two blind trusts established in their names, as well as a trust established for their children.
The returns show that Mr. Romney, whose family fortune is estimated to be as much as a quarter of a billion dollars, is among the wealthiest Americans: The family's income would put them in the top one-10th of 1 percent of all taxpayers in 2010.
Yet thanks to rules that tax income from investments at rates far lower than those for income earned in wages, Mr. Romney has a lower effective tax rate than many other affluent Americans.
Indeed, Mr. Romney will have given more to charity in 2010 and 2011 than to the Federal Treasury: He made more than $7 million in charitable donations, or about 16.5 percent of the family's income, both directly and through the couple's family foundation.
Mr. Romney, a Mormon, tithes his income to the Church of Jesus Christ of Latter-day Saints. In 2010, Mr. Romney's tithe appeared to include about $1.6 million in cash and $1.5 million in noncash contributions.
The disclosure of Mr. Romney's returns is also likely to spur new questions about the structure of his investments, including those in partnerships and funds based overseas. The documents also offer details about an aspect of Mr. Romney's finances that has been the source of intense speculation: his various offshore investments in tax havens like the Cayman Islands and Bermuda.
For example, Mr. Romney's returns revealed for the first time that some of the family's assets were held in a bank account in Switzerland for several years. During a conference call with reporters, R. Bradford Malt, the trustee who manages the Romneys' blind trusts, said he opened the account, with the Union Bank of Switzerland, "for diversification purposes." Mr. Malt said the account complied with all Internal Revenue Service reporting requirements and that the family had paid all applicable taxes on the interest earned by those assets.
"It is a bank account," Mr. Malt said. "Nothing more, nothing less."
The account, which held about $3 million, was closed in 2010, at a time when UBS was at the center of a Justice Department investigation regarding tax evasion by Americans clients of the bank.
Mr. Malt also said that the Romneys' holdings in the Cayman Islands, Bermuda, Ireland and other low-tax countries did not provide any reduction in their U.S. taxes. Bain Capital, as well as Mr. Romney's Individual Retirement Account, or I.R.A., have significant holdings in funds based in the Caymans and other low-tax countries.
But Mr. Malt said that Mr. Romney's income is taxed at the same rate it would be if the funds were in the United States. He added that some of the offshore funds in Mr. Romney's retirement account were like mutual funds, with a mix of domestic and overseas investments.
When asked whether the Cayman Island address of some investments in the I.R.A. might allow some of Mr. Romney's investments to avoid paying the Unrelated Business Income Tax, Mr. Malt said he was not certain. I.R.A.'s and certain tax-exempt funds based in the United States can be assessed a 35-percent tax on gains derived from unrelated business ventures, so one commonly used strategy to avoid that tax is to organize them through an offshore "blocker" fund in the Caymans or another low-tax country.
In the conference call, Mr. Romney's campaign counsel, Benjamin L. Ginsberg, said that Mr. Romney and his wife earned $7.4 million in so-called carried interest in 2010 and $5.5 million in 2011, reflecting the share of Bain profit that the firm pays to Mr. Romney under his retirement agreement with his former partners.
That money -- about a quarter of the couple's income during the last two years -- is currently taxed at the rate normally reserved for long-term capital gains, thanks to federal tax rules that have sparked intense debate in recent years. Mr. Obama and other Democrats have argued that carried interest should be taxed at the rates that normally apply to income earned by people providing services, which top out at 35 percent.
If Mr. Romney's carried interest income in the past two years had been taxed at that higher rate, he would have owed about $4.5 million in federal taxes, roughly $2.6 million more than he would typically be assessed under current rules.
The couple, who currently own homes in Belmont, Massachusetts; La Jolla, California; and Wolfeboro, New Hampshire, paid $672,000 in state income taxes and $226,000 in local property taxes.
Ann Romney -- the returns say it was she, not her husband -- reported paying a total of $20,600 for domestic help in 2010 to four household employees. There appears to be no similar disclosure in the incomplete 2011 returns released today.
After the question of releasing Mr. Romney's tax returns became a big political issue during the South Carolina primary campaign, Mr. Romney and his aides recalibrated their stance a number of times, ultimately disclosing on Sunday that he would release his full return for 2010 and estimates for 2011. But he chose not to follow the example of his father, who as a presidential candidate in 1967 released 12 years of returns.
By the debate on Monday in Tampa, Florida, just before he made the returns public, Mr. Romney was better prepared for questions on the topic than he had been weeks earlier. He even tweaked Mr. Gingrich, pointedly noting that he would have paid almost nothing in taxes under Mr. Gingrich's proposal, since nearly all his income is from capital gains -- a rare instance of a Republican implying that he supports a higher tax rate than a rival does.
During the conference call with reporters, Mr. Ginsberg noted that 26 people had dialed into the call from the Chicago area -- home to Mr. Obama's campaign headquarters -- and argued that the documents' release should settle any lingering questions about Mr. Romney's investments and tax burden.
Other assets held in the Romneys' blind trusts were managed by Goldman Sachs, which invested the Romneys' wealth in the stocks of companies like Apple, Research in Motion and Comcast.
One notable sale Goldman made on the trust's behalf in 2010 was 1,000 original I.P.O. shares of Goldman Sachs, which were sold to Mr. Romney in May 1999, when Goldman went public. Ordinary investors would not have been able to snag Goldman's I.P.O. shares, which were reserved for the firm's most important clients.
The Goldman shares were issued at $53 each. The trust held onto them for more than a decade, selling them in December 2010 for $161.44 a share, or $161,446.26.
Copyright International New York Times Jan 25, 2012
