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Monday, 27 August 2012 12:01

Romney's Foreign Tax Payments May Have Pushed His US Income Tax to Zero

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Last week, BuzzFlash posted a commentary entitled, "Romney Said He Paid 13% in Taxes, But He Strategically Avoided Saying Income Taxes."

As BuzzFlash at Truthout noted then, Mitt and Ann Romney have been very careful to always refer to paying their "fair share" of taxes, but both avoid using the term US income taxes (except for their partially released 2010 return).   As we pointed out, there are many kinds of taxes that are not part of what are considered US income taxes – and when Mitt Romney said last week that he paid about 13% in taxes over the years (which is galling for a guy worth a reported $250 million) he noticeably didn't say US income taxes.  In short, paying 13% in taxes is different than paying 13% in income taxes. All of us pay much more in taxes overall than we do in just income taxes.  

The simplest example of this is the regressive flat sales tax in most states – or what we pay into Social Security and Medicare funds (7.65%) that are deducted from taxes, but are not income taxes.  These are just two examples of paying taxes that could add up to 13% without that percentage reflecting actual US income taxes paid. There's also Mitt Romney's estimated $100 million IRA account (which is peculiarly large in and of itself), speculated to be nearly 2/5's of his assets.

We also noted an insightful comment by a BuzzFlash reader within last week's commentary:

I find it interesting that Romney pointed out his percent of tax paid. If he can remember his tax rate (which actually doesn't appear on the tax form itself), he should have a decent idea of how much he paid in absolute terms (which is, of course, prominent on the tax form); i.e., saying that you paid 13% in taxes represents clear avoidance of the tax question; e.g. he couid have paid 13% of $100 ($13) and have sheltered $100,000,000 through off shore tax vehicles.

Now, the New York Times notes another documented loophole Romney used to lower any US income tax he may or may not have paid: a generous allowance for deducting foreign income taxes from what he might have owed on American income taxes:

Mr. Romney’s return shows how wealthy Americans with foreign earnings can sharply reduce their tax liability in the United States. In 2010 Mr. Romney reported $2.73 million of gross foreign income. On that amount, he paid foreign taxes of $67,173, or just 2.5 percent of his gross foreign income.

After all his deductions (including the kind of noncash charges that are central to all tax shelters, like depreciation) that multimillion-dollar sum declines to just $392,000 in taxable income. This amount appears on his federal tax return, but at his 13.9 percent effective rate, the federal tax on that income — $54,627 — was more than offset by a $129,697 tax credit for foreign taxes he paid in 2010 and earlier years….

Since Mr. Romney didn’t use all the foreign tax credit available to him in 2009, tax experts said he must have reduced the tax owed on his foreign income to zero. In the highly unlikely event he also reduced his taxable income from United States sources to zero, or even showed a loss, he would have owed no federal income tax in 2009.

As we noted before, all the American public -- who are being asked to vote for Romney -- can do is speculate about how little, if any US income taxes he paid over the years – as distinct from taxes in general.

Being interviewed in the friendly confines of FOX "News" by Chris Wallace, Romney proclaimed that "he wasn’t going to 'manipulate my life' just to become president."  This was his way of justifying not closing his Swiss, Cayman Islands and other offshore bank accounts.

When a person runs for president and declares that he or she won't let being president interfere with their private financial gain, it's basically poking a stick in the eye of the American voter.