Pop quiz. How are these three facts related?
–Warren Buffett’s secretary will sit nearby Michelle Obama at tonight’s State of The Union Address.
–Oscar nominations were announced at 5:30 a.m. PST Tuesday.
–Mitt Romney has released more than 500 pages of his tax returns.
Stumped? The answer:
At 8:30 a.m. EST on Tuesday, Mitt Romney’s lawyer, investment adviser and a former Internal Revenue Service commissioner took reporters on a conference call to discuss Romney’s 2010 and 2011 tax returns. Maybe it was a coincidence that the call was scheduled for the exact moment the entire country began paying attention to a story that is on the other end of the fun-to-read-about-news spectrum: George Clooney’s best actor nomination. But probably not.
The returns confirmed what everyone has long known. Mitt Romney, and his family, are very wealthy, and wealth has its benefits. He and his wife made $21.7 million in 2010, gave about $3 million to charity, and paid about 14% of his gross income in federal taxes. Romney’s tax rate was much lower than the 35% regular tax rate that wealthy people pay on regular income, because almost all of Romney’s income comes from long-term investments, which are taxed at 15%.
TIME.com politics editor Adam Sorensen breaks down Mitt’s 2010 tax returns.
Which brings us to Warren Buffett’s secretary, who is coming to Washington to do a star turn in the First Lady’s box at the State of the Union. Buffett has famously said that his secretary pays a higher tax rate than he does, since he benefits from a lower tax rate on investments, while she makes her money as regular salary. He finds this unjust.
Mitt Romney wants to maintain this system, even as his top Republican rival now fights to lower Romney and Buffett’s effective tax rate to zero by eliminating all federal tax on investment income. Barack Obama, by contrast, wants to raise tax rates on those who make a lot of money from investments, and he has invited Buffett’s secretary to Capitol Hill to help make his case. She will be an anti-Romney, anti-Gingrich prop.
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As for the rest of Romney’s tax returns, they are the sorts of documents that are of most interest to the Obama campaign, which hopes to cherry pick them to paint an unflattering portrait of Romney. (Ben Ginsberg, Romney’s lawyer, noted that 28 of the “reporters” on the conference call where dialing in from Chicago area codes, which was almost certainly a sign of Team Obama snooping.) The returns contain lots of shiny objects that could get voter’s attention: A now-shuttered $3 million Swiss bank account; investment funds registered in the Cayman Islands; millions of income in so-called “carried interest,” which is criticized as a way of shielding regular income.
But the smoke looks bigger than the fire. Romney does not have a direct role in the investment decisions made around his money. He did not open the Swiss account or invest in the Caymans. (Although when he was at Bain Capital, he did open funds in the Caymans.) There is also no evidence that he, or his accountants, did anything illegal, or gained substantial direct benefit by hiding money overseas.
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There is, by contrast, lots of evidence that if one has to pay taxes, it is better to be rich. But this is not a situation that Romney brought about. It has been a bipartisan policy for decades. The advantage arises from terms as esoteric as the “unrelated business income tax,” which even Romney’s accountants struggled with on the conference call. For the Obama campaign, the issues raised by Romney’s taxes are about equality. For Romney, they are simply the artifacts of American success.
Both are right. And now you can read the returns for yourself. See them here.