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Mitt Romney’s 2011 Returns Reveal a Tax Code Stacked in Favor of the Very Rich Because of Loopholes and Special Rates Not Available to Ordinary Taxpayers
Washington, DC – Since Citizens for Tax Justice (CTJ) first calculated that GOP Presidential candidate Mitt Romney likely paid a 2010 federal income tax rate of 14 percent in October of 2011, CTJ’s analysts have been helping to explain the features of our tax code that allow high wealth individuals like Romney to pay such a low federal income tax rate. The explanation is that loopholes in the tax code benefit the most affluent.
After reviewing Mitt Romney’s 2011 return (an estimate of which he released in January), and the 20-year summary of the candidate’s taxes issued by his lawyer, CTJ’s Senior Counsel for Federal Tax Policy, Rebecca Wilkins, issued the following statement:
“It’s an indictment of the federal tax code that a man of Mitt Romney’s wealth could pay a federal tax rate as low as 10 percent. While he chose to forgo deductions for charitable contributions in order to keep his “commitment to the public that his tax rate would be above 13 percent,” bringing his rate up to 14 percent for 2011, it is still outrageous that the code allows such a low rate.
“He also takes advantage of a special low rate on investment income. The preferential rate on capital gains and dividends saved Mitt Romney a whopping $1.2 million in taxes in 2011, cutting his tax bill almost in half. He would have paid $3.1 million in taxes without that special treatment. And much of his low-rate income is really compensation from Bain Capital that should have been taxed like regular wages or salary, but is disguised as capital gains using the “carried interest” loophole.
“Romney also paid $675,000 under the Alternative Minimum Tax (AMT). If his own tax plan, which eliminates the AMT, had been in place in 2011, he would have saved himself an additional $675,000, or one third of his entire federal tax bill, and reduced his effective rate to 9 percent.
“Also notice that Mitt Romney’s tax return for 2011 is almost twice as long as it was in 2010. It is 379 pages long, and 250 pages are foreign entity disclosure forms. Put simply, that’s 250 pages about his offshore investments.
“Further, the summary provided by his lawyer is playing games by averaging Romney’s 20-year tax rate. Including the years 1992-97 skewed his rate upwards because during those years, the capital gains rate was 28 percent instead of the 15 percent it is now. If they’d averaged only the last 15 years, his rate would have been much lower.
“And one final point is that Romney continued to work and make lots of money even when his capital gains tax rate was almost double the current rate, the rate he wants to retain. Yet he says that the low capital gains rate is essential to incentivizing rich people to do what they do. How does he explain that?”
Citizens for Tax Justice (CTJ), founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation (www.ctj.org).