By Sam Youngman
MYRTLE BEACH, South Carolina | Tue Jan 17, 2012 10:29pm EST
(Reuters) – Republican Mitt Romney acknowledged Tuesday that his income tax rate is “probably closer to 15 percent than anything,” suggesting that one of the wealthiest people to ever run for U.S. president pays a much lower rate than most Americans.
His comment, a day after Romney agreed for the first time to release his tax returns — but not until April when they are generally filed — added fuel to his Republican rivals’ calls for him to be more transparent about his finances.
It also drew fire from the Democratic White House and other critics, who said it reflected how Romney, whose estimated net worth is $270 million, is out of touch with the experiences and concerns of typical Americans.
Romney, a former private equity executive and Massachusetts governor, seemed to feed that narrative on Tuesday. He said that he gets speaker fees “from time to time, but not very much.”
Annual campaign financial disclosure forms indicate that he was paid more than $374,000 in speaker fees from February 2010 to February 2011.
Romney’s estimate of his income tax rate suggested that like many of the wealthiest Americans, he could earn a large chunk of his income from investments – much of it in capital gains.
Because capital gains generally are taxed at 15 percent compared with the top income tax rate of 35 percent on ordinary wages, those with significant income from capital gains often pay lower tax rates than many Americans.
Such disparity in the rates within the U.S. tax code are a sore point for many Americans, even some of the very rich whose rates are relatively low.
Billionaire investor Warren Buffett, for example, has said he paid $6.9 million in federal income taxes on $39.8 million in taxable income in 2010, a rate of 17.4 percent. Buffett has said it’s unfair than his tax rate is lower than his secretary’s.
Romney is the prohibitive favorite to win the Republican nomination and the right to face Democratic President Barack Obama in the November 6 elections.
On Tuesday, the White House moved quickly to portray Romney as an elitist, which almost certainly will be a theme of Obama’s campaign this fall.
“Everybody who’s working hard ought to pay their fair share” of taxes, the White House said in a statement. “That includes millionaires who might be paying an effective tax rate of 15 percent when folks making $50,000 or $75,000 or $100,000 a year are paying much more.”
ROMNEY UNDER PRESSURE
Romney has long been reluctant to raise a curtain on his vast financial holdings.
In recent days, Romney’s increasingly desperate rivals – former House of Representatives Speaker Newt Gingrich and Texas Governor Rick Perry – repeatedly have questioned whether Romney, in not releasing his tax returns, is hiding something.
Their calls for Romney to release his returns were echoed on Tuesday in a New York Times editorial, which called Romney’s “insistence on secrecy impossible to defend now that he appears to be closing in on the nomination and questions have intensified about his personal finances.”
During Monday night’s Republican presidential debate in Myrtle Beach, Romney said, “I have nothing in (the returns) that suggests there’s any problem and I’m happy to” release them around the federal tax filing deadline in mid-April.
“I sort of feel like we are showing a lot of exposure at this point,” Romney added. “And if I become our nominee, and what’s happened (with past presidential candidates) is people have released them in about April of the coming year, and that’s probably what I would do.”
FORTUNE INVESTED IN BAIN FUNDS
Tax analysts say Romney may have good reason to be reluctant to release his returns.
His vast fortune is invested in dozens of funds linked to Bain Capital LLC, the powerhouse private equity firm he co-founded and led for 15 years. Several Bain funds have offshore connections and take advantage of tax breaks used only by the U.S. financial elite.
His tax returns could shed light on how Romney and Bain use offshore strategies to avoid taxes, said Daniel Berman, a former U.S. Treasury deputy international tax counsel and now director of tax at Boston University’s graduate tax program.
Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.
“Certain interests in foreign investment structures would have to be reported on attachments to his return,” Berman said.
On capital gains, Romney’s tax returns would not reveal any gains that he has not yet realized, even though those gains would be easy for him to lock in at any time, Berman said.
“I remember as a young lawyer being surprised to see tax returns of very successful investors showing net losses – because they were recognizing net losses” but not yet factoring in unrealized gains, Berman said.
Romney’s returns also might not spell out how much he benefits from a tax break used by private equity executives called the carried interest loophole.
This rule allows private equity and hedge fund managers to pay the 15 percent capital gains tax rate, rather than the top income tax rate, on a large portion of their earnings.
A SERIES OF ATTACKS
The demands by Gingrich and Perry are their latest attempt to draw attention to Romney’s wealth.
They also echo Gingrich and Perry’s criticism of Romney’s time at Bain, which he left in 1999. Bain was involved in overhauling dozens of companies, and in some cases laid off thousands of workers.
Gingrich, Perry and others have portrayed Romney as a job killer and, as Perry put it, a “vulture” capitalist. The attacks don’t seem to have worked, for Romney is still leading in most public opinion polls.
Gingrich continued to pound on the tax return theme Tuesday.
“It’s interesting that Romney agreed that he ought to release his income taxes but he doesn’t want to do it until April,” by which time Romney could have clinched the Republican nomination, Gingrich said during an interview with CBS.
“I think the people of South Carolina ought to know now — if there’s nothing there, why hide it until April? And if there’s something there, don’t the people of South Carolina deserve to know before Saturday?”
Gingrich added that he would release his tax returns this week. As Texas governor, Perry has released his each year.
Gingrich and Perry are battling former Pennsylvania U.S. senator Rick Santorum to put together enough conservative votes to block Romney’s march to the nomination.
Romney won the Iowa caucuses and New Hampshire primary this month – the first two nomination contests – and is favored to win the South Carolina primary Saturday as well as Florida’s primary on January 31.
Santorum, thought earlier this month to be Romney’s main challenger, has not been as vocal in calls for Romney to release his tax returns.
A Santorum aide said that he was unsure whether Santorum would press Romney on the matter, but said, “We’ve been a pretty staunch advocate of airing out all the laundry now.”
“We don’t need any surprises,” the aide said. “We need to know now.”
The Romney campaign dismissed the latest calls to release his tax returns as a sign of desperation.
“This is pasta politics,” Eric Fehrnstrom, a senior Romney adviser, said. Gingrich is “throwing spaghetti against the wall to see what sticks.”