When income tax returns are released by political figures it is always interesting to look at what is in them and what the press says about them. I thought it might be interesting to comment on some of these returns when they are released and if it generates interest I may comment on past releases of tax returns.
Mitt Romney’s return was recently released and there were remarkably few surprises. The biggest surprise was the revelation that his first name is Willard. We heard a lot of complaining from the press that he is paying only around 15% in taxes when the top tax rate is closer to 39%. We discovered that Mitt pays around a 14% federal income tax rate, but we knew it was around 15% already. In fact that 14% rate is somewhat deceptive. Much of his income (around 20%) is from dividends from corporations which pay taxes at a 35% rate. The media never points out that his effective tax rate on that portion of his income is closer to 49%. He also had about half of his income in capital gains which was also previously taxed at the corporate level. In a Wall Street Journal OpEd article on January 24, 2011, John Berlau and Trey Kovacs computed the effective tax rate paid on this income as totaling 44.75%.

We discovered Mitt was very wealthy, but we knew that also.  His investments were very profitable for the past couple of years.
We discovered he has a lot of investments, some of which are foreign. Nothing there which is unusual for a very wealthy person.  We also discovered that even though he has a 200+ page income tax return and some forms that most of us tax preparers have never seen in use, it is a reasonably simple and conservative tax return. He does not take aggressive tax positions.

This entry was posted in Income Taxes and tagged . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *