Counterparties: Mitt overpays to keep his word

September 21, 2012

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As of this afternoon, Mitt and Ann Romney’s 2011 tax returns are now public. As if you needed any reminder of how mind-numbingly complex the financial details of a man worth $250 million are, that means returns for Mitt and Ann Romney, along with their estimated return, which was completed in January and allowed them to be granted an extension, the Mitt Romney Trust, the Ann Romney Trust, and the Family Trust. A summary statement from Romney’s trustee, Brad Malt, and a letter from Romney’s tax preparers, PricewaterhouseCoopers, were also released.

In total, it’s thousands of pages of tax arcana — far beyond your average 1040. But simplicity was not what anyone was expecting from a man whose $13,696,951 in income puts him in the top 0.01 percent, as the NYT’s Annie Lowrey highlights.

The Romneys paid $1,935,708 in taxes on that income, for an effective tax rate of 14.1%. Oddly, Romney could have paid even less, but chose to deduct only $2.25 million of just over $4 million in charitable donations. Why under-deduct? BuzzFeed’s Zeke Miller asked the Romney campaign and they said that Romney “was in the unique position of having made a commitment to the public that his tax rate would be above 13%. In order to be consistent with that statement, the Romneys limited their deduction of charitable contributions”.

In effect, before releasing their tax returns, the Romneys reduced the size of their charitable deduction so their effective tax rate would conform to Mitt’s previous statement that’d he’d never paid less than 13% in taxes. (Had he claimed the full $4 million deduction, their effective tax rate would have likely been around 12%.) The release also combines taxes and donations, which the NYT’s David Firestone says doesn’t add up: “charity and taxes cannot be conflated to make it sound like you are “giving away” a larger portion of your income than you are”. While it fulfilled one pledge, Romney’s under-deduction means he overpaid his taxes in 2011. And he’s previously said that if he overpaid his taxes, he wasn’t qualified to be president.

In comparison, the Obamas paid $162,074 in taxes on $789,674 in 2011 income, a 20.5% effective rate.

Also released today, medical disclosures for Romney and running mate Paul Ryan revealed them to be in freakishly good shape, describing Romney as a “vigorous man” with “reserves of strength, energy, and stamina that provide him with the ability to meet unexpected demands”. — Ben Walsh

On to today’s links:

The Fierce Urgency of Whenever
SEC chair: You guys should really deal with this money market reform thing – WSJ

EU Mess
Germany, the IMF and the ECB are squabbling over the Greek bailout bill – WSJ

New Normal
New York has the highest income inequality in America – NYT

The battle over what’s in the Dodd-Frank bill will never, ever end – DealBook
Three states are suing over the constitutionality of Dodd-Frank – Competitive Enterprise Institute

Good Questions
Mark Cuban: What business is Wall Street in? – Blog Maverick

The worst failures of Apple’s terrible new map system – Huffington Post
Apple’s iOS 6 iPad clock design is a blatant rip-off of a famous Swiss design – CNET

All British pensioners over 65 get a £10 Christmas bonus – NYT

Welcome to the new LBO boom – Reuters
High-frequency trading: even worse than you think – John Carney

New Normal
The huge disparities in US public school financing – Bloomberg

Story Time
“The narrative structure of the global weakening” – Robert Schiller

It’s Academic
Study says the average Death Row last meal is incredibly high in calories – SSRN

The Fed
Kocherlakota changes his tune: “You have to learn from the data” – WSJ

First-Hand Accounts
On the difference between British and German traders – Guardian


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