Romney's wealth could cast a big shadow

WASHINGTON (AP)— Mitt Romney’s newly released tax returns represent an extraordinary accounting of the household finances and far-reaching corporate investments of one of the richest U.S. presidential candidates in generations, with an annual income that tops $20 million.

How the details of Romney’s extensive wealth will play among Republican taxpayers, rival campaigns, the media and the American public only started to emerge Tuesday, as more than 500 pages from a 2010 tax return and a 2011 estimate spilled out both significant and minor revelations about Romney’s scattered holdings, tax strategies and charitable donations.

The returns outline both the dimensions of Romney’s finances and the complexity of the tactics used to reduce his effective tax rate close to the low 15 percent paid by many middle-class Americans. Among the new details contained in the documents are Romney’s continuing profits from the private equity firm he founded but no longer runs, a Swiss bank account closed just as Romney launched his White House run and new listings of investment funds that were set up in offshore locations from the Caribbean to Ireland and Luxembourg.

Romney’s advisers stressed that he met all his federal tax obligations, provided maximum transparency and did not take advantage of “aggressive” strategies often used by the ultra-rich. Still, for millions of American taxpayers who are just beginning to grapple with their latest returns as tax season looms, Romney’s multimillion-dollar returns provide a window into an unfamiliar world.

Tax law experts familiar with the formidable financial portfolios of investment fund managers said Romney’s returns would at the very least reinforce the rising public issue of income inequity.

“The average American has a hard time understanding their own two-page tax return let alone Gov. Romney’s 200-page return,” said Joseph Bankman, a Stanford University professor of business and law who has testified to Congress on tax issues. “What would jump out at anyone is the sheer amount of money and low tax rate he pays, as well as the enormous complexity of his financial transactions.”

Romney paid about $3 million in federal income taxes in 2010, having earned more than seven times that from his investments. That income, $21.7 million, put him among the wealthiest of American taxpayers. Romney’s campaign said Tuesday he followed all tax laws.

At the same time, Romney gave nearly $3 million to charity — about half of that amount to the Mormon Church — which helped lower his effective tax rate to a modest 14 percent, according to records his campaign released Tuesday.

Romney’s income puts him in the top 0.006 percent of Americans, based on the most recent Internal Revenue Service data, from 2009. That year, only 8,274 filers reported income above $10 million.

He could be worth up to $250 million, based on previously released financial information.

The documents were released as President Barack Obama prepared to deliver his State of the Union message, in which he is expected to talk about economic fairness.

Asked during a round of TV interviews Tuesday about Romney’s tax rate, given that he’s a multimillionaire, White House adviser David Plouffe said: “We need to change our tax system. We need to change our tax code so that everybody is doing their fair share.”

Other Democratic Party voices were less restrained. “He used every loophole in the book available to the wealthy and corporations to avoid paying his fair share,” said Democratic National Committee Executive Director Patrick Gaspard.

Romney’s GOP rivals had no immediate comment. But House Speaker John Boehner, R-Ohio, defended the Romney’s tax rate as being close to what most Americans pay on long-term capital gains from the sale of investments.

“We all know that there’s a reason we have low rates on capital gains,” Boehner told reporters “That is because it spurs new investment in our economy and allows capital to move more quickly.” 

Romney had long refused to disclose any federal tax returns, then hinted he would only offer a single year’s return in April. But mounting criticism from his rivals and a hard loss in last week’s South Carolina primary forced his hand.

For 2011, Romney will pay about $3.2 million with an effective tax rate of about 15.4 percent, the campaign said. Those returns haven’t yet been filed yet.

In total, he would pay more than $6.2 million in taxes on $45 million in income in the past two years, his campaign said.

“Gov. Romney has paid 100 percent of what he owes,” said Benjamin Ginsberg, the Romney campaign’s legal counsel. Ginsberg and other advisers insisted Romney did not use any aggressive tax strategies to help reduce or defer his tax income.

The advisers acknowledged that Romney continues to earn money from investments from Bain Capital, the Boston-based private equity firm the candidate founded and managed between 1984 and early 1999. Under an agreement with the firm when he left, Romney continued to earn “carried interest” on new Bain investments as a former partner in the firm even though he no longer ran the operation.