Wednesday, January 25, 2012

Romney reports tax bill of $7.9 million for 2010 and 2011

Jan 24, 2012

TAMPA/WASHINGTON (REUTERS) - Republican presidential candidate Mitt Romney released tax records on Tuesday indicating he will pay US$6.2 million (S$7.85 million) in taxes on a total of $45.2 million in income over the years 2010 and 2011.

Bowing to increasing political pressure to provide more detail about his vast wealth, the former private equity executive released tax returns indicating he and his wife, Ann, paid an effective tax rate of 13.9 per cent in 2010. They expect to pay a 15.4 per cent rate when they file their returns for 2011.

Mr Romney's tax rate is below that of most wage-earning Americans because most of his income, as outlined in more than 500 pages of tax documents, flows from capital gains on investments.

Under the United States tax code, capital gains are taxed at 15 per cent, compared with a top tax rate of 35 per cent for wage earners.

Mr Romney released the tax returns after a week in which his chief rival for the Republican presidential nomination, former House of Representatives Speaker Newt Gingrich, questioned whether Mr Romney was hiding information about his finances and cast him as being out of touch with most Americans.

Mr Gingrich's attacks on Mr Romney helped him upset the former Massachusetts governor in the South Carolina primary on Saturday.

Since then, Mr Romney has vowed to be more aggressive in returning fire.

He has launched a series of attacks questioning Mr Gingrich's character, judgment and lucrative work as a Washington consultant, and released his tax returns to try to nullify Mr Gingrich's criticisms on that front.

The tax rates Mr Romney reported paying could add fuel to a national debate over the fairness of the tax code, and coincides with broader concerns about income inequality symbolised by the Occupy Wall Street movement.

Mr Romney's campaign officials stressed that his tax rate is based mostly on income from investments that are held in a blind trust. Mr Romney's holdings include an undisclosed amount in funds based in the Grand Cayman Islands and other overseas entities.

Mr Romney advisers stressed that the holdings in the Caymans - along with those in a Swiss bank account that was closed in 2010 after an investment adviser decided it could be politically embarrassing to Mr Romney - were reported on tax returns and were not vehicles to avoid taxes.

They also stressed that Mr Romney, whose holdings are in three blind trusts, makes no decisions as to how his money is invested.

Regardless, the emerging picture was of a man of great means who contributes mightily to charity. The documents showed he and his wife contributed US$7 million in charity over the two years, much of it going to his Mormon church.

Mr Romney, whose estimated net worth is between US$190 million and US$250 million, is among the wealthiest Americans ever to seek the presidency.

[The first thing to note is that if Romney is elected president, the US$400,000 a year salary is not the reason he is seeking the presidency.He neither needs the money or wants it. He pays more in taxes and gives more to charity than what he would earn as a president.

The second thing to note is that a flat tax on capital gains values wealth make with cash, than with effort. Capital gains tax should have a deductible for say the first $60k or $200k (depending on how generous you want to be, but after that, the tax rate should not be less than income from work.

Assuming a retiree has invested wisely, if he is able to generate $60k in annual capital gains, that can finance his retirement more than comfortably. Gains beyond that is wealth that should be taxed.

In comparison, Obama tax for 2010 was US$1.8m for his income of US$5.5m or about 33% tax rate. Most of his income is from book sales.]

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