Like most everyone else, I got my first look at Mitt Romney's 2011 Tax Return today and a bullet point style letter prepared by PWC summarizing 20 years of returns (http://www.mittromney.com/disclosure/letter-from-pwc). Given PWC's history of being accused of signing fraudulent tax documents and agreeing to pay large sums of money to settle those charges I have no doubt that they would not jeopardize their integrity by writing a summary letter stating what a Presidential candidate asked them to state. I also won't get into the fact that capital gains taxes were much higher during the first 10 years of period than the last 10 years so the fact he paid an average tax over 20% isn't all that surprising or relevant. Instead, I want to focus on his generous charitable contributions.
The $4,020,772 he gave to charity last year is impressive and undoubtedly provided great benefits to those who received them. I would even venture to say it provided more benefit than it would have if he paid taxes on it as income instead of donating it. Much of it probably went to the 47% of Americans who pay no federal taxes. Honestly, I am not sure why he isn't praising these people instead of demonizing them. He himself proudly stated earlier this year "I pay all of the taxes I am legally required to pay and not a dollar more". Why can't the 47% be equally as proud of paying all the taxes they are legally required to pay? But I digress... I want to stay focused on his generous charitable contributions.
The piece I want to focus on is the additional roughly $250k Mitt was generous enough to donate to the Federal government! Yes, you read that correctly, Mitt only claimed $2.25M of his $4M of charitable donations which in turn amounted to him giving the Federal government a $250k donation. I'll show my work for those who want to follow the math... $4M - $2.25M = $1.75M * 14.1% effective tax rate = $250k (yes, I am rounding for convenience and effect). Now the cynical side wants to say Mitt did this so Democrats would scream "Mitt paid too much in taxes" which many have already started championing. These are going to make for great commercials this fall.
However, I think the reason for this donation goes much deeper and even further than his campaign's statement that this was done so Mitt could continue to stand behind his claim that "in the past 10 years I have never paid an effective tax rate below 13%". I will let you do the math on this one, but if Mitt took the entire $4M deduction he was entitled to it would have dropped his effective tax rate below 13%. I believe this donation is part of Mitt's grand plan to balance the budget and cut taxes at the same time. If Mitt is able to convince the other 5.1M millionaires in the US to make this same donation it would generate $1.3 TRILLION in additional revenue. If you are wondering why that $1.3T number sounds familiar to you, it is the same number Hal Mason reports in his budget dilemma video as the budget deficit for 2012.
Let me be the first to say, Mitt Romney has done his part to solve the budget deficit and hopefully he can convince the other 5.1M millionaires to follow his example. If he can do that he will get this Democrats vote!
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