John F. Kennedy was the scion of a business fortune. Billionaire Ross Perot’s success spurred his candidacy. Democrat John Kerry’s wife’s fortune dogged his.
Mitt Romney, the Republican former executive of buyout firm Bain Capital LLC, is among a line of well-heeled contenders for the White House, and the release of his tax return yesterday was part of an election-year ritual: a peek into their finances and the taxes that they pay. Romney made $21.6 million in 2010 -- some $59,000 a day, weekends included, and paid $3 million in taxes, an effective rate of 13.9 percent.
His wealth and tax rate, less than half the top marginal rate on wage incomes, stand out against even his wealthy competitors, reflecting the fortune made in finance and the lower tax rate given to income from capital gains.
“He’s got an awful lot of money,” said Roberton Williams, an analyst with the non-partisan Tax Policy Center in Washington. “It puts him not just in the top 1 percent, or the top tenth of one percent -- he’s way, way up there.”
Republican rival Newt Gingrich, whose $3.14 million income included speaking fees, paid 32 percent of that in taxes. President Barack Obama, moonlighting as a best-selling author, paid 26 percent of his $1.7 million income as taxes in 2010.
‘Much Less Tax’
“What’s clearly the case is people with a lot of investment income pay much less tax on that income than people who make that income from working,” Williams said. “That’s the way our system is set up.”
Romney’s wealth has figured prominently in a Republican presidential contest at a time when the U.S. economy is still struggling to replace the jobs that were lost in a recession that was fueled by Wall Street’s credit crisis.
Gingrich has questioned whether Romney’s fortune was made at the expense of workers at the companies he acquired, an issue raised by a film Gingrich supporters released before the South Carolina primary. In Congress, Romney’s returns reignited a debate on the tax treatment of so-called carried interest, which provides a relative handful of investment executives with preferential tax rates.
Romney said he anticipated that his income would draw Democratic attacks and said there was no need to apologize.
“Oh, I’m sure people will talk about it,” Romney said during a debate in Tampa, Florida, on Jan. 23. “You’ll see my income, how much taxes I’ve paid, how much I’ve paid to charity. You’ll see how complicated taxes can be.”
He added: “I pay all the taxes that are legally required and not a dollar more. I don’t think you want someone as the candidate for president who pays more taxes than he owes.”
The length of Romney’s tax return argues the case for a simpler tax code, said David Logan, an economist with the Tax Foundation, which advocates for a simpler tax system with lower rates. The joint filing by Romney and his wife, Ann, runs 203 pages. That’s more than four times as long as Gingrich’s return. Obama’s is 59 pages.
“If there’s anything that can illustrate the complexity of the tax code, it is the number of pages that got released for his return only,” said Logan. “This complexity can absolutely benefit high-income earners with preferential rates. It absolutely, positively affects low-income earners too.”
Romney also directed his wealth to charity, giving $2.98 million in 2010, including $1.5 million to the Church of Jesus Christ of Latter-Day Saints, the Mormon church. Gingrich donated $81,133, including $9,540 to the Basilica of the National Shrine of the Immaculate Conception. Obama gave $245,075, with the most, $131,075, going to the Fisher House Foundation, which provides housing for military families receiving medical care.
Romney’s wealth, with a net worth estimated by his campaign of between $190 million and $250 million, would make him among the richest U.S. presidents if he were to win the office. Forbes magazine, which compiles such a ranking, put him at No. 4, behind land-rich founders George Washington and Thomas Jefferson and Herbert Hoover, who made his money in mining.
Such wealth in a candidate isn’t unprecedented. Ross Perot, founder of Electronic Data Systems Corp., had an estimated wealth of $2.4 billion in 1993, a year after he initiated an independent candidacy for the presidency driven by concern about the effect of global trade on employment.
In 2004, Democratic vice presidential nominee John Edwards, the attorney-turned-senator, disclosed that he paid $22,741 in taxes on $433,546 in income the prior year, a rate of 5.2 percent that was kept low by investment income.
Senator John Kerry faced questions about the wealth of his wife, Teresa Heinz Kerry, the heir to a $500 million fortune, when he ran for president in 2004 and she resisted initial requests to release her tax returns. Once she released them, it showed she paid $628,401 on income of $5 million, a rate of about 12.5 percent. In 2008, Cindy McCain, the wife of Republican presidential nominee John McCain and chairwoman of a beer distributor, reported paying $1.1 million in federal taxes on income of $4.2 million the year before.
Franklin Roosevelt, who was president during the Great Depression and railed against organized money, hailed from a wealthy family. John F. Kennedy’s father, Joseph Kennedy, made a fortune in business before his son went on to win the presidency in 1960.
U.S. voters have no natural aversion to wealthy candidates, said Barbara Perry, a fellow at the University of Virginia’s Miller Center. She said it can be less of an obstacle for Democrats, though, because their party since the 1930s has been defined by using the power of government to help the needy.
Wealth a Challenge
His wealth may prove a challenge to Romney, she said, given the toll that the Wall Street credit crisis of 2008 took on the economy.
“How does that play in these difficult economic times when his particular source of wealth -- the finance industry -- is the very cause of the economic difficulty?” Perry said.
During their Jan. 23 debate, Romney used his tax bracket to turn the tables on Gingrich, who has advocated eliminating levies on capital gains altogether. Romney, whose tax return lists a $12.6 million capital gain, said his rival’s plan would cut his taxes even more.
“Under that plan, I’d have paid no taxes in the last two years,” he said.
To contact the editor responsible for this story: Jodi Schneider in Washington at Jschneider50@bloomberg.net