Mitt Romney releases tax returns, showing $42.6M in 2010-11 income

Mitt Romney's campaign released two years of the candidate’s tax returns on Tuesday as he sought to get past a political controversy that has helped Newt Gingrich surge to the top of the Republican race.

The tax forms show Romney will pay $6.2 million in taxes on $42.5 million in combined income between 2010 and 2011. The 2011 returns are projections and will not be finalized until the April filing deadline.

Because the majority of Romney's income comes from investment profits, Romney will pay an effective tax rate of 13.9 percent — lower than many Americans who make the majority of their money from wages.

That tax rate makes it unlikely that Romney’s release of his tax forms will end the political attention they are receiving, particularly with both Gingrich and President Obama’s campaign team drawing attention to them.

Obama and Gingrich both pay higher effective rates than Romney, whose income is primarily taxed at the 15 percent rate for capital gains. Obama paid a 23 percent effective tax rate in 2010, while Gingrich paid 31 percent.

Obama will deliver a State of the Union address Tuesday night that is expected to hammer home his call for wealthier taxpayers to pay a higher rate. While the president won’t mention Romney, Obama is expected to double down on his call for higher taxes on capital gains as part of the so-called "Buffett Rule.” That rule, named for investor William Buffett, says the wealthy should pay a higher tax rate than the middle class and poor.

The DNC accused Romney of "ducking and dodging the tax return issue" and "not paying his fair share" on a call with reporters Tuesday.

"Mitt Romney used every loophole in the book available to the wealthiest and large corporations to avoid paying his fair share," said Patrick Gaspard, the DNC's Executive Director.

Romney’s campaign argued Tuesday that the nearly 500 pages in tax documents turned over Tuesday morning revealed a "complicated and fully transparent" record of how the governor "pays 100 percent of the taxes he owes.”

On a conference call with reporters, the Romney campaign insisted that the lower tax rate was in full compliance with federal tax law.

"Gov. Romney earned his wealth as a highly successful businessman," Romney attorney Ben Ginsberg said on the call, saying that Romney's business acumen "helped to create thousands of American jobs."

Ginsberg also emphasized that Romney's tax proposal would not dramatically change the rate at which he was taxed.

"Under Gov. Romney's short-term tax proposal, the Romneys' effective tax rate would be about the same," Ginsberg said. "Under Speaker Gingrich's, the Romneys would have a zero effective tax rate. As you know, the governor is opposed to that."

The Romney campaign also produced the trustee who manages Romney's blind trusts to battle back against media reports that Romney had been using a Swiss bank account or investment accounts in the Cayman Islands to shield his assets from American taxes. Brad Malt, who runs the accounts, says those reports are "flatly wrong."

"The blind trust's investment in the Cayman Funds are taxed exactly the same as if Gov. Romney owned the shares directly and in the United States," Malt said.

"These are not accounts in any sense of the word, these are investments in third-party entities," he added. "Suppose I buy 100 shares of Toyota stock. I do not have a Japanese account. It's a foreign investment, not a foreign account."

Malt also insisted that other investments — including holdings in a Swiss bank account and in mutual funds invested in Freddie Mac and Fannie Mae — were unknown to the Romneys.

"These are blind trusts. I am not allowed to communicate with Gov. or Mrs. Romney about investments," Malt said. "There was no discussion about Freddie or Fannie investments."

Malt also disputed media reports that Romney had closed down his account with Swiss Bank UBS because of political concerns. But the disclosure — coupled with the investments in mutual funds based in areas traditionally known as tax havens — creates a perception that could be easily seized upon by his political opponents.

"I regularly review Gov. Romney's investments and … this account wasn't serving any purpose," Malt said.

Already, on Tuesday morning, the Democratic National Committee was circulating an article in the National Journal referring to Romney as "Swiss Mitt."

There were some other noteworthy revelations about the Romneys' personal finances and charitable giving in the tax documents. The largest donations in 2010 were to the Mormon church — which received $145,000 from the Tyler Charitable Foundation — and the George W. Bush Presidential Library, which got $100,000.

Romney also continues to earn income from his work at Bain Capital, bringing in $7.4 million in "carried interest." That income is paid in a way that allows Romney to pay taxes at the capital gains rate of 15 percent — compared to 35 percent had it been taxed as wages — and avoid paying Social Security or Medicare payroll taxes on the amount.

That revelation brought sharp criticism from Rep. Sandy Levin (D-Mich.), the ranking member on the House Ways and Means Committee who has twice introduced legislation that would require carried interest to be taxed at the normal income rates.

“The fact that one of the leading Republican presidential candidates benefited to such a significant extent from this egregious loophole only further illustrates the need to address this issue once and for all," Levin said in a statement. "Regardless of whether compensation is earned for managing investments of other people’s money or providing other types of services, it should be taxed at the same rates paid by everyone else in the U.S. Americans expect fairness in our tax code and getting rid of this loophole is a significant step in the right direction.”