Stephen Reader covers politics for It's a Free Country, WNYC's interactive politics site. He joined the station in 2010 and has also worked for Studio 360, WNYC's Peabody Award-winning show about art, culture, and creativity.
Explainer: Why Mitt's Taxes are 5 Times More Complicated Than Newt's
Tuesday, January 24, 2012
According to a tax expert, Romney's 2010 return is on another planet from his main competition, Newt Gingrich.
Mitt Romney's 2010 tax return was released this morning, along with his 2011 return, after much prodding from his Republican opponents, who hoped that information about his income and effective tax rate would undermine Romney's attempts to seem "in touch." Newt Gingrich, who released his 2010 tax return last week, was among those leading the call for Romney to make his tax information public.
What we learned from Newt
Newt Gingrich's return shows he made $3,162,424 in 2010 and paid a total tax bill of $994,708. His effective tax rate was about 31 percent, close to what you'd expect for someone in the top tier of the tax bracket.
Alan Taksar, a CPA in Sherman Oaks, California, said the return was perfectly boring. "He's got wages, interest, dividends, an S-corp. I do these returns all day long."
Gingrich's primary sources of income were wages ($450,000) and his S corporation Gingrich Holdings, Inc (about $2.5 million). Taksar said all this was "ordinary income," or income that doesn't come from capital gains. (In fact, Gingrich posts a loss of $3,000 in capital gains.) If not for the fact that it's about 60 pages long and deals with millions of dollars, the return would look pretty average, according to Taksar.
What we learned from Mitt
Mitt Romney's return shows he made $21,661,344 in 2010—about seven times as much as Gingrich—and paid a total tax bill of just over $3 million—only about three times as much as Gingrich. His effective tax rate was about 14 percent, close to what you'd expect for someone who makes almost all his money in capital gains, which are taxed at 15 percent.
"Mitt paid as little as you can pay," said Alan Taksar. "I have clients who make $100,000 who pay a higher effective rate than Mitt."
Romney's return is in many ways a negative image of Gingrich's: Romney reports zero income from wages and about $12.5 million—more than half his total income—from capital gains. Romney reports earnings from blind trusts, investment in foreign companies, and other funds. The rest comes from interest, dividends, refunds, and business income.
In addition to the high total income and low effective tax rate, the most striking thing about Romney's tax return is its length and complexity. At 204 pages, it's incredibly sophisticated compared with Newt Gingrich's.
"The guys who did Newt's tax return, if they did Mitt's, they would have a headache," Taksar said. "You don't even see this kind of return from wealthy people, usually. He's totally into investing money, and owns a portion of a corporation doing investments out of the country. He's reporting it, which is fine, but to the average guy, [those options] just aren't available."
While Taksar said there's nothing incriminating or underhanded about either candidate's tax return, Mitt's should provide plenty of ammunition for Newt Gingrich.
"[Mitt's] tax return is five times more complicated than the average taxpayer's return," Taksar said. "There's no way in a thousand years that I could look at it and say, that guy lives in the same world I do."
Which is exactly the picture Mitt's opponents have been trying to paint.