The Romney campaign released Mitt’s 2011 taxes Friday afternoon in an attempt to put the whole tax issue behind them, but they’ve only raised more questions. As many people quickly pointed out, he actually overpaid his taxes to make sure that his rate stayed above that 13% he said was the bare minimum he’d paid. He did this by only claiming some of the charity contributions he made.
He donated just over $4 million to charity, but only claimed a $2.25 million deduction when he could have claimed it all. That raised his taxable income and his tax rate to 14.1% when he could have paid about 9%. Much has been made over the fact that he once defended his low rate by saying that if he paid more than he had to, that might disqualify him from being president, but that’s just a political “gotcha” argument that doesn’t really matter. There are more important considerations here.
The first and most obvious is that he was clearly acting retroactively to make sure he stayed above 13%. As Rachel Maddow said, “In order to make that statement from last month retroactively true, Mr Romney’s accountants went back and artificially inflated his tax rate so it would comport with what he said.” And in fact, his spokespeople are essentially owning up to it all.
He has been clear that no American need pay more than he or she owes under the law. At the same time, he was in the unique position of having made a commitment to the public that his tax rate would be above 13%. In order to be consistent with that statement, the Romneys limited their deduction of charitable contributions.
But I think there’s more to it than that. The campaign also released a summary from his accounting firm of his previous 20 years of taxes that said three things: First, that he paid federal income taxes every year; second, that the lowest federal rate he paid was 13.66%; and third, that the “average annual effective federal tax rate” was 20.2%.
But this raises a few questions. First of all, did he go back and amend any of those returns to pay a higher rate than he had at the time for political purposes? Remember, he has a track record of doing that. He did it when he was running for Massachusetts governor, repeatedly swearing that he had filed as a Massachusetts resident for the previous seven years when, in fact, he had filed as a Utah resident for several years (paying state taxes to Utah, getting big tax breaks for his Utah house by claiming it as his primary residence, etc). So he went back and amended those returns after the fact to make the false statements he’d been making all along true — or something resembling true, through some magic bit of time travel. Secondly, I’d be willing to bet that nearly all of those “charity” contributions went to his church, not to an actual charity. Legally, that is all deductible too.
But maybe all of this distracts from the real issue, which is that even with the artificially inflated rate he paid in 2011, he still paid less than half the rate that I paid, and that most people pay. And that is only because he has arranged his finances to make sure his income is all in the form of capital gains because that means he pays a 15$ marginal rate rather than the 35% that someone of his wealth ought to be paying. This is exactly how many of our wealthiest citizens manage to pay a far lower rate than those of us who can’t play such games with our income.