Journalism in the Public Interest

Inside Romney’s Tax Returns: A Reading Guide

Mitt Romney released 550 pages of tax returns Tuesday. News organizations are making their way through them. Here’s our guide to where to look to make sense of the numbers.


Republican presidential candidate and former Massachusetts Gov. Mitt Romney speaks with people during a roundtable on housing issues on Jan. 23, 2012, in Tampa, Fla. Romney released 550 pages of tax returns on Jan. 24, 2012. (Joe Raedle/Getty Images)

In response to growing pressure from voters and competitors, Republican presidential candidate Mitt Romney released 550 pages of tax returns Tuesday, covering two years of income. As one of the richest men ever to run for President, Romney's filings are enormously complex, and the subject of close scrutiny. News organizations are making their way through the returns. Here's our guide to where to look to make sense of the numbers.

The Washington Post, one of the news outlets with early access to the returns, reports that Romney got most of his income -- $21.7 million in 2010 and $20.9 million in 2011 — from profits, dividends or interest from investments. As you can see in the Post's annotated guide, none of that money came from wages or salaries, which is the main source of income for most Americans. Because most of his earnings came from capital gains, Romney paid just under 14 percent of his income in taxes in 2010. In comparison, in 2010 Obama was taxed at 26.3 percent and Gingrich at 31.7 percent. Even these figures understate the difference: Romney paid Medicare taxes on only his speech fees, while most Americans pay the 1.45 percent Medicare levy on nearly all of their income. See more candidate comparisons in this New York Times chart, or this one from CNN.

The American Enterprise Institute blog notes that Romney actually pays a higher effective tax rate than 60 percent of Americans (a family making around $45,000 would have an effective tax rate of 7.4 percent). But as Reuters explains, 14 percent is less than half the top rate on ordinary wages, which can be taxed up to 35 percent. Romney paid or will pay a total of about $6.2 million in taxes on his income from 2010 and 2011. Over those two years, he and his wife Ann have given about the same amount in charitable donations, including $4.1 million to the Church of Jesus Christ of Latter-day Saints. The Salt Lake City Tribune notes that Romney is one of the Mormon Church's biggest benefactors, and pays about a tenth of his income in tithe.

The Times' Caucus blog is keeping a live blog of findings as reporters comb through the returns. Some of their latest discoveries:

  • Speaking fees: Last week Romney told a crowd in South Carolina: “I get speaker's fees from time to time, but not very much." Turns out his author/speaking fees amounted to precisely $528,871 in 2010, and $110,500 in 2011.
  • The top 0.006 percent: According to the IRS, anyone who makes more than $10 million would be in the top 0.006 percent of taxpayers (according to their latest numbers from 2009). With an income of $21 million in 2010, Romney would be even higher.
  • Mortgage? Like Gingrich, Romney doesn't seem to have a home mortgage, as neither took a deduction in 2010. Obama, on the other hand, took a home mortgage interest deduction of $49,945.

Romney's 2010 tax return indicated he had a "bank account, security account or other financial account" in Switzerland, but the account was closed in 2010, his aides told the Wall Street Journal. The return also reports financial accounts in Bermuda and the Cayman Islands.

As noted in Bloomberg Businessweek, the recent release is likely to spark renewed controversy over how the tax code treats the extremely wealthy. The phrase at the center of this debate is “carried interest.” Partners in private equity firms, hedge funds and real estate developments get most of their compensation through carried interest, and since those earnings don't count as ordinary income, they are taxed much less.

In a short primer on the subject, the Wall Street Journal describes it this way:

Put simply, carried interest is a share of a partnership's profits that is taxed as a capital gain as opposed to ordinary income. It is a good deal: The top rate on gains held longer than a year is 15%, so the tax on carried interest is usually less than half the top 35% rate on ordinary income. There aren't FICA or Medicare taxes, either.

Benjamin Ginsberg, the Romney campaign's chief counsel, disclosed to the New York Times that Romney earned $7.4 million in carried interest from private equity firm Bain Capital in 2010.

Obama has repeatedly called the tax code's treatment of carried interest a “loophole” that's “just not fair,” and Warren Buffett mentioned it earlier last year when he demanded that the government stop coddling the mega rich. New York Mayor and billionaire Mike Bloomberg told the Wall Street Journal that “If it were up to me, I would end the concept of carried interest.”

Yet James Stewart, a Pulitzer Prize winning reporter who writes a business column for the New York Times, doesn't see it that way. Last year he wrote that carried interest is “indistinguishable from nearly all other forms of compensation that are treated like capital gains, such as stock options, deferred stock grants for corporate executives and many forms of incentive compensation, which is widespread across many industries. Like all capital investments, carried interest entails risk, since there's no way of knowing what it will be worth until long after the labor is performed, often years later.”

In a political climate characterized in part by the Occupy movement and “99 Percent,” these concerns aren't likely to disappear any time soon. In fact, as Politico notes, the Romney tax returns are fodder for the White House, which plans to tackle precisely this issue of economic fairness at tonight's State of the Union.

Glenn LaBauve

Jan. 24, 2012, 5:56 p.m.

One of the biggies I noticed immediately was his legal but highly questionable “donation” of appreciated stock to a charity he controls and is required to only give 5% of each year to actual charitable causes. He was able to take the full value as a deduction without ever paying taxes on the gain.  The Tyler Foundation got so many hits on its web site that it had to put up a disclaimer that they were not the charity listed on Mitten’s return.  This smells fishy to me and really needs to have more investigation. The Salt Lake paper needs to hire an accountant when a little over $1.5 million is 10 per cent of 21 million.

Stephanie Palmer

Jan. 24, 2012, 5:57 p.m.

I would like to remind the american enterprise institute that while Romney pays a higher rate than 60% of the American people, at $21 millions, he also gets a hell of a lot more than the rest of the American people. So just knock off the BS.

George Vartanian

Jan. 24, 2012, 6:31 p.m.

Unless I’m mistaken, the capital gains tax was instituted to stimulate investment which would bring products to market and provide employment.  I would agree that the risk involved would seem to warrant a favorable tax impact upon sale of the stock for the ORIGINAL investors.  Anyone buying stock after sale by the original investors is not impacting employment or product but counting on the increase of the stock price through market forces.  As such, I don’t see the justification of the 15% tax on capital gains of any kind other than for the original investors.

The GOP wants those tax rates on carried interest and capital gains reduced to zero. ZERO!

I haven’t had a chance to review the Romney’s actual return but have looked thhrough the 990s for their foundation. Much of the grants made by the foundation go to the LDS church or its affiliates. Since the last 990 is from 2009, we cant tell how.much they gave in 10 and 11 - but it is considerably more than reported and may push the charitable contributions to the church past what they taxes.

Unless I’m mistaken, since most of Mitten’s income is from interest, dividends and capital gains, his net worth must be like way, way huge.  I mean, just assuming his rate of return on all of his money is a mere 5%, then the total value of his portfolio has to be $20.9M/.05 = $418M which seems a little high (Please correct my calculation) so let’s just say Mitten’s net worth is over $200M.  Well, if I had that much money on hand, I certainly wouldn’t be worrying too much about a roof over my head or health care or a tasty meal.  Soooo…I guess I’d grudgingly pay a few more million’s in taxes so that some unlucky guy (whose job was sent to China after Bain Capital right-sized his company) had the basics ‘til he got back on his feet.  Then again, maybe I’d need all that cash to pay for a private army to keep the 99% at bay.

“James Stewart, a Pulitzer Prize winning reporter who writes a business column for the New York Times, doesn’t see it that way. Last year he wrote that carried interest is “indistinguishable from nearly all other forms of compensation that are treated like capital gains, such as stock options, deferred stock grants for corporate executives and many forms of incentive compensation, which is widespread across many industries.”

He makes a good point. Maybe we also ought to be taxing stock options and other forms of deferred compensation as income?

Obama’s American Dream “Don’t work too hard.”

Gingrich’s American Dream “Now that you caught me cheating, how about an open relationship?  Maybe a three…”

Romney’s American Dream “I’ll give 4.6 million dollars to my favorite church to shave another 1% off my taxes, You Bet!”

Its a toss up between the second two actually…

Sheldon Spector

Jan. 25, 2012, 11:32 a.m.

Its seems to me that the 15% should only apply to gains made when there is actual invested capital at risk.  Invested capital requires that taxes were paid on the invested capital prior to investment.  Thus stock options, deferred stock grants, hedge fund fees would not apply . Hedge fund managers “Carried interest”  income is no different than a merchant who invests in a product and hopes to sell it later or a salesman on commission who may spend years landing a big sale.. When a merchant finally sells it or when a salesman finally books his commission he pays full taxes on the income no matter how long he has worked at it… The risk of no gain is not the same as the risk of actual invested capital. Income from your “job” is regular income.

I’m all for tithing. I give to my church on a weekly basis. But with Romney running for the highest office in the land, and tax returns like these, I really doubt his sincerity to this country as he gives more to a church than he does in taxes. And the Swiss bank account that was closed? What’s he hiding, and where is the money now? Where it can’t be touched? He’s out of touch with America.

The funny thing is that the system is flipped exactly the wrong way.  We tax income earned in ways that damage the economy (minimally, by altering prices without changing supply or demand) less than money earned by supplying a good or service.

That discourages real business and encourages speculation and giving employees “raises” that cost nothing and have no real value.

On top of that, I’ve realized that money has a non-linear value, in that more money means more opportunity for making more at a low risk to your standard of living.  The stability of the government makes that possible and is minimally worth paying taxes to support.

Rather than weird cut-off marks that mean some people take home less money if they get a raise, some bright economist needs to calculate that “marginal value potential” (or whatever the appropriate term would be—there’s probably already a real term) for each dollar and tax a fraction of that (non-decreasing) amount.

I’ll accept charitable donations as a way to pay down your income, but other than that, pay by the formula.  Lower if your income derives from real work and products, higher if it’s from “financial products” of any sort beyond direct pricing contracts (i.e., “locking in” the price of heating oil or copper wire to make budgeting more predictable).

But the fact of the matter is that there isn’t “a” loophole.  Every one of the thousands of pages of tax code is at least one loophole, and that’s the entire point of the tax code.  If there weren’t loopholes, it would fit on an index card and accountants would be out of a job.

To be honest, I am surprised by the information on Mr. Mitt. Romney’s financial background and wondering how he, if elected, would be able to serve the people of USA, better than how the Bushes did in the recent past that resulted in present economic condition of USA and some other parts of the world.

I would be curious( not enough to figure it myself) as to what the total amount of his income he keeps after deducting taxes, charitable donations and tithing to his cult.

A Young - Stock options and restricted stock as well as deferred comp are all taxed at ordinary income rates. The rational argument is that carried interest should be treated exactly the same way, as ordinary income.

George Vartanian - lower capital gains taxes were introduced because of the effects of high levels of inflation (when inflation is at 10%, it significantly degrades the real value of investment) but like most reductions in taxes that were meant to address a specific issue, they just stick, even when the root cause goes away. In the case of cap gain, we even get the lowering from 28% to 15% after the effects a serious inflation is eliminated.

The curious (irrational ) thing is that every republican in congress opposes
a tax structure that would effect Romney’s tax obligation yet some how the fact that he pays so little taxes on so much income is an issue with the republican voters who elected them.

Wind your way through the US tax code and what you have is people like Mitt, who while, paying a ton of taxes, doesn’t pay enough. And the average person like me has no clue how much tax he paid. Because accountants and accounting in America is a bogus profession where write-offs, loopholes and dishonesty is engaged in exponentially.


End the endless complex tax code and go flat tax. It’s gotta happen if the average Joe is going to be able to understand it.

This is not to mention the amount of time and money US taxpayers spend to employ geeks and nerds to audit taxpayers who are gaming the system.

Every time a new rule or regulation is made someone gains, and someone else loses. That’s why they are made…by politicians and regulatory body’s that stand to gain significant clout/power or money.

With a flat tax, zero write-offs, etc, people like you and I would again have a grasp of the tax system again.

You see how many rules and regulations our system has now? Every new rule can and will interact positively or negatively with every other rule. As the rules mount, the loopholes do to exponentially. Those who have the time and money to employ those who are willing to game the system and exploit the loophole stand to win.

Google avoided paying $14 billion. Now multiply that by X number of companies that don’t pay their fair share.

Capsaicin, if you make five thousand dollars a year, do you think that five percent (paying $250) is an equivalent burden as someone making a million per year (paying $50,000)?

Do you think that the opportunity lost by both parties is proportional, when the richer is still left with nearly a million dollars?

I absolutely agree that the tax code needs to be simplified to no more than three lines of explanation (what’s your income, how do you calculate your tax burden, and where do you send the check).

However, a flat tax ignores how money interacts in terms of opportunity and utility (I’m guessing somewhere between the square of the amount and exponentially, but I’m no economist) and places an effectively negligible burden on the wealthy while squeezing blood from the stone of the poor.

Additionally, that “interactive bonus opportunity” (leverage through credit, being able to employ people to free your time up for other opportunities, access to decision-makers, etc.) to having large sums of money comes for free, so enlightened self-interest suggests that paying to sustain it (in the form of a higher tax rate) is going to be more profitable to the wealthy than a flat tax would be.

Keep in mind that it’s 2012.  “Simple” doesn’t need to mean trivially calculable with pen and paper.  Today, since payroll reports your earnings anyway, your taxes could even be calculated centrally, by computer, with a grievance process objecting to the reported income.

I wonder if Mitt could get Newt’s vote if he promised to make polygamy legal again once he is elected?

Victor Edwards

Jan. 26, 2012, 4:02 p.m.

Please. While Romney gives several million to the Mormon church, it is still no more percentage than all the faithful members of my church [I am a pastor], though they make less than $40,000 per year. His charity is no greater than my people’s, and likely more since his is coerced by the Mormon church. Just ask him the consequences of NOT tithing to the Mormon church. In fact, though my people use the tenth as a guideline, some give even more, and it is not “levied” but as a result of the Biblical admonition, “God loves a cheerful giver.” Now THAT, folks, is virtuous.

Victor Edwards

Jan. 26, 2012, 4:10 p.m.

Mr. Steward, the NYTimes columnist, doesn’t seem to get the message. It is not that “carried interest” is so different from the other “incentive compensation” that is the issue; rather, it is that there should be no such CATEGORY, especially if it involves tax breaks. If a company wishes to extend “incentive compensation,” let it do so at its own expense, not the taxpayers. Get rid of any category of income except that: income. It is all the same and should be taxed the same. Isn’t that the magic “flat tax” that everyone talks about? No way should any executive or CEO or manager enjoy stock options, deferred stock or deferred compensation if it at all involves tax benefits. That is internal business that should be borne by the company itself. Stop this nonsense.

Vic the point that interested me to the extend it is even accurate to use the word “interested” to describe this topic was if Mitt kept less than 50% of what he earned after taxes, tithing and charitable giving .If so the fact that none of his advisers suggested that it might be a better sound bite than “i pay only what taxes the law requires and not a penny more” to hopefully demonstrate he isn’t as out of touch with reality than he actually is. By the way Vic do I detect a holier then though attitude when you suggest that the Morman church is some how more of a fascist institution then one practicing what is misleadingly called Christianity as practiced here in America. I am fairly certain that Jesus would not be happy to associate with other of your hypocritical superstitions.

The new generation politics will be run by guys with self-less wisdom and not by guys with a large sum of money.

shahislam you might want to consider putting down whatever it is your are smoking .

@ a born,
you connot know what the future holds! God exist and works through people in subtle ways. When voting system will be totally electronic then the above optimistic views would become realisable by public awareness.

Victor Edwards

Jan. 28, 2012, 3:58 p.m.

a.bron, your resort to name calling without knowing anything about me is typical of your ilk. Ask Romney what the consequences would be if he quit tithing to the Mormon Church. I know their “policies” [I dare not use the word “doctrine” in fairness]: he would no longer be Mormon. That is NOT the same as in my own church, where I have had one sermon on giving over a 12 year period! [Actually, it was but a reminder of that duty, and was but a part of one sermon] We have no direct policy except to say that the membership has a duty to support those who lead them, with the full biblical support of the Apostle Paul. My people give because of their indebtedness to their Lord and Savior Jesus Christ. There is no mandate involved: none. The Mormon tithe is a tax, and there are punitive consequences to NOT paying that tax. [I have former Mormons in my congregation]. And to think, we have not even mentioned “pre-existence,” “spirit children,” and other strange and perverse views of the Mormons. When you know what you are talking about, then you can talk.

Vic,Tithing is hardly what I was referring to when I was referring to holier than though. How an organization shakes down its members is of no real concern to me. I was more referring to how participants in a religion which has only 2 basic rules one of which is love others as you love yourself could possibly be in possession of the 10% to tithe when there are so many impoverished people in their own community. Obviously Christian dogma must be tweaked for the consumer obsessed American because having 2 cars, 2tvs etc. while their neighbor lives in squalor would cause Jesus to chase those Christians out of his church faster than he did the money changers. Good thing it is only a story based on primitive superstition and archaic rituals otherwise that proverbially well paved road to hell would be beset with gridlock from the 99.9% of “Christians” on their way to their “just reward”
ps may god bless you and have mercy on your and all your misguided flocks, souls.

I have worked hard in the classroom for over 20 yrs and that fact that I pay a higher percentage of my gross income to taxes than Romney, really ticks me off.

Paul Nakroshis

Feb. 2, 2012, 8:57 p.m.

Personally, I think it is immoral to allow people to make as much money as Romney. I’d argue we should have an income cap——say $1 million a year in total. If you’re not happy on that level of income, then it’s not the money that is your problem.
Too many people on this planet don’t even have enough food to eat, and I find it very odd indeed that people in this country buy the republican argument to lower taxes on the wealthy. It’s nuts.

Where’s the candidate to speak for the 98.4% of us that make less than $200,000 per year? After all, we’re the vast majority in this country. And while we’re at it, we need to jettison an economic system that is based on continual growth—- we’re on a finite planet, and unless our economic system is based on that unavoidable fact, we’re headed for trouble.

Mitt Romney is the most qualified person to be the next president of the US, if you’d like to see it remain a FREE country!  Ron Paul is kookoo on foreign policy and thinks it’s just fine if Iran has nuclear capablities, “it’s none of our business.”  Right. Gingrich will lose big to Obama. Santorum, a good guy, doesn’t have the organization or the money to win, and he’s too far to the “right” for independents to vote for him. 

Gov. Romney was my governor—he was consistently conservative, and did not take a salary.  He also left a $2 BILLION SURPLUS for his successor, current Gov. Deval Patrick (D-Milton).  He lived right around the corner from me, supposedly, and I never once saw the carpetbagger in 10 years living in that neighborhood.  Patrick, like Obama, has spent, spent, spent, and Mass. voters voted him in AGAIN.  People are insane; what can I say?

Romney also refused a salary to turn around the Olympics in Salt Lake City, and I believe he says he wouldn’t take a salary if elected president.  Don’t hate on Romney because he’s smart, and knew how to build a business and become extremely successful, which is what I think a lot of people are doing, the “Mitt haters.”  He is tough on illegals (vetoed the instate tuition bill for illegals and required all Mass. state troopers to check the immigration status of persons arrested.  He cracked down on duplication, waste and fraud in gov’t—no more business as usual for gov’t workers!!!  I watched him slice and dice in Mass. and he’ll do it as POTUS.  Why so many supposed intelligent conservatives don’t see that Romney is the best and **only** shot at removing Obama from the White House is beyond comprehension.  It sure as hell won’t be “angry Newt.”  McCain, part II… 

p.s.  Romney already paid at the top rate on his money when he earned it as AGES and SALARY.  His “14% interest” rate was for capital gains on THOSE earnings. Personally, I believe capital gains taxes should be lower—it would get investors investing and spending.  Why do we keep punishing the rich if we want the economy to improve?!?  And I think it’s nice that he tithes 10% to his church.  I don’t believe Ovomit, Biden or Gingrich did.  Where’s all the scrutiny on the “charitable giving” for the Obama’s?!?  Hypocrites!

In reply to Paul—you think there should be a $1 million “cap” on earnings in the US.  If you think that, then why don’t you move to a communist country and see how you like it.  “Redistribution of wealth is another of way of saying STEALING WEALTH!!!!!”  If you don’t like capitalism, move to Canada, Germany, Sweden, Russia, etc.  I’m sure you’ll enjoy it there since capitalism offends you so deeply.  p.s.  I make chump change now, but not forever, because by living in America I have the OPPORTUNITY to make my life what I want it to be.  It may not be easy, but Americans have OPPORTUNITY to make a good living, start a business, etc.  SOCIALISM WILL NEVER BE THE NORM HERE!!!!

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