Citizens for Tax Justice a few months ago estimated that Mitt Romney, due to most of his income coming from investments, pays a tax rate of around 14 percent, a far cry from the 35 percent top income tax rate. Romney then confirmed that the bulk of his income does, indeed, come from investments (and is thus subject to the top capital gains tax rate of 15 percent), but he has refused to release his tax returns in order to reveal the definitive tax rate that he pays.
However, during a press conference on the campaign trail today, Romney did give a glimpse into his finances, confirming that he pays “closer to the 15 percent rate”:
Q: What’s the effective rate you’ve been paying?
ROMNEY: What’s the effective rate I’ve been paying? It’s probably closer to the 15 percent rate than anything, because my last ten years, I’ve, my income comes overwhelmingly from investments made in the past, rather than ordinary income, rather than earned annual income.
As Center for American Progress Director of Fiscal Reform Seth Hanlon has explained, the latest data shows that “many middle-class families paid much more [in taxes] than the 17.5 percent average paid by the very rich.” When President Obama suggested the “Buffett rule,” aimed at ensuring that millionaires can’t pay lower taxes than middle class families, Romney derided it as “class warfare,” and “the wrong way to go.”
One of the reasons Romney is able to drive his tax rate down so low is that he is still earning money from his private equity firm, Bain Capital, that is likely subject to a pernicious tax loophole. This loophole lets wealthy money mangers like Romney pay the capital gains tax rate on profits they make investing other people’s money, turning the justification for having a lower capital gains tax rate completely on its head.
During the same press conference, Romney said that he only makes some income from speaker’s fees, “but not very much,” which is money that would be taxed at normal income tax rates. From Feb. 2010 to Feb. 2011, Romney earned $362,000 in speaker’s fees.