FLORENCE, S.C. – His wealth and taxes suddenly a campaign focus, Mitt Romney said Tuesday he pays an effective federal tax rate of about 15 percent. That’s far less than if his earnings were wages rather than gains from investments and dividends, and the disclosure under pressure triggered a sharp response from the Democratic White House as well as one of his GOP presidential rivals.
Romney told reporters he also received money from speechmaking before he announced his presidential candidacy early last year “but not very much.” He provided no details, but in his financial disclosure statement, released last August, he reported being paid $374,327.62 for such appearances for the 12 months ending last February.
That amount alone would place his income among the top 1 percent of all Americans, and Romney’s description of it as a relatively small amount suggested his overall income was far higher.
It’s well known that Romney’s father was the chairman and president of American Motors, and he himself was a successful businessman and founder of Bain Capital, a private equity firm, where he earned millions. At the same time, his refusal to release his tax returns has been a persistent issue, and one that flared anew in a debate Monday night in which he grudgingly said he might release them in April.
On Tuesday, he said he would release at least one year’s returns in April.
Republicans trying to defeat him in Saturday’s South Carolina primary are hoping he’ll make them public far sooner.
The White House, which expects Romney to win the Republican nomination and take on President Barack Obama this year, reacted, too.
Spokesman Jay Carney said: “This only illuminates what (Obama) believes is an issue, which is that everybody who’s working hard ought to pay their fair share. That includes millionaires who might be paying an effective tax rate of 15 percent when folks making $50,000 or $75,000 or $100,000 a year are paying much more.”
Newt Gingrich, the former House speaker who runs second in some polls in South Carolina, taunted the former Massachusetts governor: “I think we ought to rename our flat tax. We have a 15 percent flat tax, so this would be a Mitt Romney flat tax and all Americans would pay the rate” that he paid. Gingrich is expected to release his own returns on Thursday.
At 15 percent, Romney’s federal income tax rate would still be higher than the rate paid by many Americans.
On average, households making between $50,000 and $75,000 will pay a federal income tax rate of 5.7 percent this year, according to projections by the Tax Policy Center, a Washington think tank.
However, when Social Security and other taxes are included, that same household would pay an average federal tax rate of 16.6 percent.
Romney’s wealth – he is worth between $190 million and $250 million – puts him among the richest Americans. But if most of his income is from investments, it could help him to significantly lower his federal tax bill compared to people who make money in other ways.
While the top federal tax rate for investment income – qualified dividends and long-term capital gains – is 15 percent, the top tax rate for wages is 35 percent on taxable income above $388,350. Wages are also subject to Social Security and Medicare payroll taxes, while investment earnings are not.
Romney was asked about his taxes shortly before he left South Carolina for a high-dollar fundraiser in New York.
“What’s the effective rate I’ve been paying? It’s probably closer to the 15 percent rate than anything,” Romney said. “Because my last 10 years, I’ve – my income comes overwhelmingly from investments made in the past, rather than ordinary income or rather than earned annual income.”