How did Mitt Romney manage to pay just 13.9 per cent tax?

WEALTHY Republican presidential hopeful Mitt Romney has bowed to public pressure and lifted the lid on his tax arrangements, revealing that he and his wife Ann paid income tax in 2010 at a rate of 13.9 per cent and expect to pay their 2011 tax bill at a rate of 15.4 per cent.

The Romneys earned approximately $20m in both years – about 400 times the median US household income – yet managed to pay tax at well below half the normal 35 per cent rate. How did they get away with it?
 
Simple. All the Romneys’ earnings were considered to come from investments, for which a norm of 15 per cent is payable in the US, and none from wages, which attract a top rate of 35 per cent tax.

The Atlantic Wire website explains that the “carried interest” rule on investments "allows him [Romney] to classify the money that he continues to make from [private equity firm] Bain Capital as capital gains, rather than earned income.”

The website adds: "There are certain to be more nuggets of interest revealed. Like the fact that he had a Swiss bank account that was closed in 2010."

But it could take time to unearth everything of interest, says the New York Times Caucus blog. That’s because the Romney family’s tax returns for 2010 alone, including those for various trusts and a charitable foundation, came to a staggering 443 pages.

The blog also notes that after months of 'Occupy' protests on behalf of the "99 per cent", activists will be interested to learn that Romney is not just a member of the top one per cent - he finds himself in the top 0.006 per cent.

At the weekend Romney's main rival, Newt Gingrich, released his tax returns that showed he paid almost $1m in tax in 2011, but at a rate of more than 30 per cent.

The question is, whether that makes Gingrich the mug and Romney the wise guy in the view of American voters – or does it make Gingrich the honest taxpayer and Romney the robber baron?

The Los Angeles Times notes that Romney’s tax returns serve mainly to "demonstrate how ultra-rich Americans benefit from rules that most Americans can't take advantage of because they simply don't earn enough."
 
But whatever accusations are levelled at him, Romney seems determined to ride out the storm. "I pay all the taxes that are legally required and not a dollar more," he told a debate in Florida on Monday. "I don't think you want someone as the candidate for president who pays more taxes than he owes."

Romney is also likely to direct his critics to a point made by the BBC - that in 2010/11 the Romneys wife donated $7m to charity. However, the biggest recipient was the Mormon Church - hardly the widows and orphans fund. ·