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Romney pegs his tax rate at around 15 percent

 

Updated 1:35 p.m.

FLORENCE, S.C. -- Mitt Romney estimated Tuesday that he pays about a 15 percent effective tax rate on his earnings, a much lower rate than many middle-class Americans pay.

Facing increasing pressure from his GOP rivals, particularly former House Speaker Newt Gingrich and Texas Gov. Rick Perry, to release his tax records, Romney seemed to commit to release some returns after having been somewhat cagey on the topic at last night's presidential debate.

If and when those records are released, Romney suggested they would show he pays about 15 percent of his earnings to the government.

"It’s probably closer to the 15 percent rate than anything,” Romney said in response to a question about his effective tax rate. “Because my last 10 years, I’ve — my income comes overwhelmingly from investments made in the past, rather  than ordinary income, or rather than earned annual income.”

Romney's tax rate has been subject to much speculation since the multi-millionaire former CEO told reporters months ago that he would comply with all financial disclosure laws, but had no intention of releasing his tax returns as has been traditional among presidential nominees since the 1970s.

Since December, much of the fire directed toward Romney on this issue had come from Democrats, but last week, Gingrich said he would release his returns this Thursday, and called on Romney to do the same. At last night's debate in Myrtle Beach, Perry also tweaked Romney, saying he should release his tax returns publicly, before the nomination process concluded.

"Mitt, we need for you to release your income tax so the people of this country can see how you made your money. And I think that’s a fair thing. Listen, here’s the real issue for us, as Republicans, we cannot fire our nominee in September," Perry said last night. "We need to know now. So I hope you’ll put your tax records out there this week so the people of South Carolina can take a look and decide if, you know, we’ve got a flawed candidate or not."

Romney hedged last night on whether he'd release those records, but appeared to be more definitive on Tuesday.

"We looked at prior races for president, and in prior races for president the tradition has been that the nominee releases his tax returns in tax season, in April," Romney said. "And I know that if I'm the nominee, people will want to see the most recent year, and see what happened in the most recent year and what things are up to date and so they'll want to see the tax returns that come out in April, so rather than sort of have multiple releases of tax returns, why-- we'll wait until the tax returns for the most recent year are completed, then release them."

The tax issue is an especially sensitive issue for the Romney campaign, given the former Massachusetts governor's status as the wealthiest of the presidential candidates. He is estimated to be worth around $200 million, according to financial disclosure documents. Much of that wealth came as a result of Romney's work for Bain Capital, the private equity firm he had cofounded.

Federal tax rates vary from 10-35 percent of income for most Americans, with state and municipal taxes adding to the burden. Given Romney's wealth, he would be in the highest bracket, if he were taxed on earned income. 

But Romney pays a much lower rate because most of his income comes from investments, which are taxed at lower rates. Warren Buffett, who also derives much of his income from investments, has said this is unfair.

The tax burden someone like Romney would face cuts to the core of the fiscal debate that has roiled Washington over the past year. President Obama has called on the wealthy to shoulder a larger share of the tax burden, especially since they benefit from a more favorable tax rate on earnings gleaned from nontraditional sources of income, like investments, dividends or interest.

Romney addressed that argument to an extent, noting his opposition to Gingrich's proposal to eliminate all capital gains taxes.

"You’d have individuals – the Warren Buffett argument -- Warren Buffett, Bill Gates would probably pay no taxes at all," he said. "Today they probably pay 15 percent. Very high-income people of this country pay roughly 15 percent of taxes if their resources are coming from investments and under their plan it would go to zero. I just don’t think that’s the right course."

Romney provided no indication as to what level of taxes he thought the wealthy should pay on their investment-related income, but said he thought savings in the tax code should be directed toward providing tax relief for the middle class, and lowering corporate income taxes.