Romney: 'I Pay All the Taxes That Are Legally Required'

During the debate in Tampa on Monday, Mitt Romney declared: "I pay all the taxes that are legally required and not a dollar more."

While this is true, Romney's tax returns show flawed tax laws that favor investment gains over actual earned wages.

Billionaire Warren Buffet said the returns show how wrong tax laws are:

"It's the wrong policy to have," Buffett told Bloomberg Television's Betty Liu in an interview yesterday. "He's not going to pay more than the law requires, and I don't fault him for that in the least. But I do fault a law that allows him and me earning enormous sums to pay overall federal taxes at a rate that's about half what the average person in my office pays."

Today Romney released his tax returns for 2010 and an estimated return for 2011 after bowing to political pressure to release them. You can view them here.

Reutersreports:

Republican presidential candidate Mitt Romney released tax records on Tuesday indicating he will pay $6.2 million in taxes on a total of $42.5 million in income over the years 2010 and 2011.

Bowing to increasing political pressure to provide more detail about his vast wealth, the former private equity executive released tax returns indicating he and his wife, Ann, paid an effective tax rate of 13.9 per cent in 2010. They expect to pay a 15.4 per cent rate when they file their returns for 2011.

Romney's tax rate is below that of most wage-earning Americans because most of his income, as outlined in more than 500 pages of tax documents, flows from capital gains on investments.

Under the U.S. tax code, capital gains are taxed at 15 per cent, compared with a top tax rate of 35 per cent for wage earners.

The Guardianadds:

The documents show that Romney's income places him in the top 1% of earners in the US, which is only likely to add to the political embarrassment around the release of the returns because of its resonance in the age of the Occupy movement and their 'We are the 99%' slogan.

The Romneys paid an effective tax rate of 13.9 per cent in 2010.

TPMreports that while the tax records have been released, there are still unanswered questions:

The second big unanswered question is much more technical, but potentially explosive -- indeed the answer could undermine Romney's claim that his overseas investments do not allow him to avoid or defer US taxes.

Midway through the call [Mitt Romney's political and financial aides had with the media Tuesday morning several], a reporter asked if Romney's individual retirement account (IRA) was structured in such a way that it managed to avoid an obscure 35 percent tax called the Unrelated Business Income Tax (UBIT). This issue was first raised by the Wall Street Journal, but the question was asked in such a way that Romney's Brad Malt was able to dodge it.

"Governor Romney's IRA is not structured in the Caymans; it's not located in the Cayman's. It's tax deferred just like your IRA, and my IRA," Malt said.

True as far as it goes. But as NYU tax lawyer Daniel Shaviro explained to me last week, that's not how this particular strategy works. The key is that this obscure tax can be triggered if an IRA or other tax exempt entity borrows to make investments. But an IRA can avoid the tax altogether by investing in offshore entities that do borrow to make investments of their own. When the dividends return to the IRA, they are exempt from the unrelated business income tax.

ThinkProgressreports that Romney's returns show that he gives more to the Mormon Church than the federal government.

Mitt Romney has never hidden the fact that he has a promised tithe to the Church of Jesus Christ of Latter-day Saints, but according to his tax returns released today, he gives back more to the Mormons than he pays to the federal government. Since 2010, the Romneys have given $7 million to charity, but over $4 million of that went directly to the Mormon Church, while they paid only $3 million to the IRS last year.

The Mormon Church is notoriously anti-gay, having raised an estimated $22 million in support of California's Proposition 8 in 2008, in addition to providing close to 90 percent of the early door-to-door volunteers advocating for the discriminatory measure.