We now know for sure that Mitt Romney is super rich and that his wealth sets him apart from most Americans. For one, he derives most of his money from investments rather than a salary or wages. In 2010, according to his newly released tax returns, he earned $21.6 million in income from a mix of carried interest, capital gains, and dividends.
There’s little doubt that tax experts, policy wonks, and Democratic operatives will spend the next several days combing through his lengthy tax filing for telling details. National Journal can offer up five first impressions about Romney’s tax returns and about what it tells us about the candidate.
Mitts' sons would get crazy rich under their dad's tax plan. Romney’s tax plan is less regressive than plans laid out by the other Republican candidates, meaning he hasn’t outlined yet the ways he would slash tax rates for individuals, apart from making the Bush-era tax cuts permanent. He would, however, eliminate the estate tax entirely. That means that under his own tax proposal, his kids would inherit their father’s wealth tax-free. How much cash is that? No one knows for sure, but Romney is estimated to be worth as much as $250 million. Romney boys – are you in the market for a small island, perhaps?
Romney's own deductions may not survive under his tax plan. Speaking of the way Romney’s tax plans would affect his own filings, how about deductions like charitable donations or state and local taxes? Romney has preached the GOP mantra of flattening the tax code and broadening the base. The latter is usually code for eliminating tax breaks known as tax expenditures on items like the mortgage-tax deduction, state and local taxes, and charitable donations. Romney and his wife claimed $4.5 million in itemized deductions in 2010, roughly $3 million of which went to charity. It will be interesting to see Romney flesh out the fate of such tax breaks on the campaign trail, particularly as he and so many middle and upper class Americans benefit from them.
Carried interest is going to be a huge campaign issue. Romney made about $7.4 million of his $21.7 million in income in 2010 from carried interest, according to his campaign’s lawyer, Ben Ginsberg -- a data point that’s not clear from his tax return. Ginsberg says in 2011, Romney calculates he made $5.5 million off carried interest.
The carried-interest provision allows the income of hedge-fund managers and other investment advisers to be taxed at 15 percent, a rate remarkably lower than the top tax brackets under which wealthy individuals typically file returns. The thinking goes that hedge-fund managers and other investment folks risk their own capital as part of their business and therefore should be taxed at a lower rate. This isn’t untoward or illegal, of course, but it should elevate the carried-interest debate and the merits of taxing those professionals at 15 percent to a big campaign issue. So far, the Romney campaign has also remained mum, apart from saying the candidate broadly favors tax reform.
Romney's not a big borrower. Who knows how much debt, if any, Romney racks up on credit cards, but the candidate appears to not have any mortgages on his homes. Or, at least, his personal tax return for 2010 does not claim any mortgage-tax deduction.
Romney's views on taxes? Kind of Darwinian. In the business world, "creative destruction" is a popular phrase. It’s shorthand for the idea that sometimes old business models or ways of thinking need to be destroyed for a corporation to make progress, break through, and make more money. It’s certainly a popular philosophy among tech executives and management consultants, eager to vaunt the innovations of their pet business projects. And it extends to a slightly Darwinian philosophy that only the best and brightest deserve to survive and thrive in the corporate world.
It is an idea that Romney seems to extend to the way he pays his taxes. He made his money and wants to keep as much of it as possible, while still complying with the IRS. It may not hand much cash back to the federal government, but it offers a look at the mindset of the Romney candidacy. If you’re smart enough to make money, you get to keep it. It’s a right that Romney supports, and his tax filings show the lengths he and his family have gone to preserve their money at as a low of tax rate as possible.
There are so many more questions that need answers. Like, why did Romney claim a foreign tax credit in 2010 of more than $120,000? And, how do all of these blind trusts work? More to come.