Senate Majority Leader Harry Reid charged Mitt Romney with manipulating his 2011 taxes to “conform with his public statements,” after the Republican presidential challenger's return showed he paid nearly $500,000 more than he should have.
"Governor Romney is showing us what he does when the public is looking," Reid said. "The true test of his character would be to show what he did when everyone was not looking at his taxes."
Reid was referring to the Republican presidential candidate's decision not to take the full write-off on the huge amount he and his wife Ann gave to charity last year. The return, released Friday, show the couple donated some 30 percent of their $13.7 million income — but they did not take the full write-off, making their effective tax rate higher.
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One tax expert estimated that decision cost the Romneys a little under half a million dollars.
"The information released today reveals that Mitt Romney manipulated one of the only two years of tax returns he's seen fit to show the American people — and then only to 'conform' with his public statements," the Nevada Democrat said in a statement. “That raises the question: what else in those returns has Romney manipulated?”
He then asked when will "the American people see the returns he filed before he was running for president?"
The decision not to take the full amount was described by tax experts as unusual.
"I was in private practice for 40 years and don't know that I ever had a client who said, 'I don't want to take all my deductions,'" David Kautter of the Kogod Tax Center at American University told Reuters.
Kautter, who spent his career at the accounting giant Ernst & Young, estimated that if Romney had taken the full charitable tax break, his effective tax rate would have been about 10.5 percent. The return showed Romney paid an effective rate of 14.1 percent last year.
Kautter told the Wall Street Journal that Romney overpaid by a little less than $500,000.
The revelation is yet another blow to Romney, ending a week of setbacks. During a Republican presidential primary debate in January, when the question of his taxes was raised, he said, "I don't think you want someone as the candidate for president who pays more taxes than he owes."
The Romneys reported about $4 million in charitable donations, including at least $1.1 million given to the Mormon Church to which they belong. Mormons typically "tithe" 10 percent of their income to the church.
Romney attorney Brad Malt said the Romneys took a deduction of only about $2.25 million. The move, he said, was meant to keep their effective tax rate above a 13 percent minimum level that Romney said recently his rate had stayed above for 10 years.
"The Romneys thus limited their deduction of charitable contributions to conform to the governor's statement in August," Malt said in a statement to Reuters.
Romney has been under fire to release more than two years of tax returns. He released his 2010 returns in January along with a draft of his 2011 tax record.
For 2010, Romney paid a 14 percent effective income tax rate, paying $3 million in federal taxes on a $21.7 million income. He donated about $3 million to charity.
He estimated his 2011 income at about $20.9 million. He revised that down to $13.7 million in the filing released on Friday — and he paid $1.9 million in taxes on that income.
The return also showed the Romneys earning about $6.8 million in investment income.
Investment income often is subject to tax rates lower than that for wages and salaries, which are taxed at a top rate of 35 percent. The current top rate for capital gains and dividends is 15 percent. That helped the Romneys achieve their relatively low tax rate for 2011 and other years.
Democrats have criticized the Romneys' tax rate as evidence that the wealthy do not pay their fair share under current rules.
By contrast, President Barack Obama and his wife, Michelle, reported earning about $789,674 in income in 2011 — giving about $172,130 to charity, or about 22 percent — according to filings.
The Obamas' largest contribution was to the Fisher House Foundation, which provides housing for war veterans.
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The Obama campaign responded to the release of the 2011 data by highlighting Romney's tax rate and by calling for him to release more years of returns.
"People like Mitt Romney pay a lower tax rate than many middle-class families because of a set of complex loopholes and tax shelters only available to those at the top," Stephanie Cutter, Obama's deputy campaign manager, said in a statement to the Wall Street Journal.
The Romney tax data also included a review of the former Massachusetts governor’s taxes for the previous 20 years, ending in 2009. The Romneys’ accountant, PricewaterhouseCoopers, said that the couple had owed an average effective federal tax rate of 20.2 percent over that period. Romney has steadfastly refused to release more than the latest two years of returns.
After the 2011 return was released, the Romney campaign circulated a news report commenting that "it appears that Harry Reid’s infamous source alleging that Romney paid nothing in taxes for 10 years was wrong.”
In August, Reid said in an interview with the left-leaning Huffington Post that he had heard the information from an investor with Romney’s private-equity company, Bain Capital.
Reid refused to identify the source or to offer any evidence. Romney at the time specifically denied the charge, but eventually released his 2010 return.
In the interview, Reid told the Huffington Post that he had received a phone call “about a month ago,” from a person who had invested with Bain.
"Harry, he didn't pay any taxes for 10 years," he claimed the individual said.
Reid admitted at the time that he had no idea about the veracity of the claim.
“Now, do I know that that's true? Well, I'm not certain," he said in the interview. "But obviously he can't release those tax returns. How would it look?”
Reid said that, based on the no-taxes allegation, Romney’s fortune was likely to be far higher than the $250 million that is regularly cited.
“It's a lot more than that,” he said. “I mean, you do pretty well if you don't pay taxes for 10 years when you're making millions and millions of dollars."
Reid even brought Romney’s father George into the interview. George Romney started the now-common practice of releasing multiple years of returns when he published 12 years’ worth during his 1968 run for the Republican White House nomination.
“His poor father must be so embarrassed about his son,” Reid told the Huffington Post.
Romney’s campaign responded by telling the Huffington Post that he had “gone above and beyond the disclosure requirements by releasing two years of personal tax returns in addition to the hundreds of pages of financial disclosure documents he has provided to the Federal Elections Commission and made public.”
Reid’s accusation immediately rallied the GOP, with former presidential candidate Pat Buchanan being among the first to call him out.
Buchanan told Fox News’ Greta Van Susteren that Reid’s comments were “beneath the dignity of the office of the Senate majority leader.”
Van Susteren pointed out that Reid, an attorney, would know that such an anonymous allegation would never be allowed in court.
“The Democrats are trying to change the subject,” Buchanan responded. “They cannot win on Barack Obama's record. They know that. And so what you have to do is they have got to get material on Romney to damage him and make him utterly unacceptable.”
“That shows a measure of desperation.”
Republicans soon demanded that Reid release his own returns — something he has refused to do, sparking charges of hypocrisy.
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