Putting Romney’s tax returns in presidential context


The controversy over what’s hiding in Mitt Romney’s unreleased tax returns continues.  But even without the missing filings, putting his 2010 and 2011 tax numbers in context is strikingly informative. It dramatically shows what an outlier Romney is on a few basic tax and income dimensions.

Figure 1 plots effective tax rate and adjusted gross income on all the recent presidential tax returns we could find, including Romney’s 2010 and 2011 returns (we consulted the Tax History Project for original returns and we standardized the data here).

Figure 1. Income and Tax Rates


This scatter plot highlights two things: First, the two highest income years we observe are Romney 2011 ($21.6 million) and Romney 2010 ($20.9 million). Nobody else comes close. The next closest are Obama 2009 ($5.5 million) and Obama 2007 ($4.1 million).

Second, the two lowest effective tax rates we observe also belong to Romney. The 2012 Republican candidate paid an effective tax rate of 13.9% in 2010 and 15.4% in 2011. Next lowest is George H.W. Bush, who paid a 15.5% rate in 1991. By contrast, in Obama’s two highest earning years, he paid a rate of 32.6% (2009) and 33.7% (2007).

The reason is pretty straightforward. Romney’s income primarily comes from investments, and the resulting capital gains are taxed at a rate of 15%. By contrast, Obama’s income came primarily from book sales during his highest-earning years. This is considered normal business income, and the top marginal tax rate for such income is 35%.

Figure 2 puts Romney’s capital gains in context. Nobody else comes close to his $12.6 million and $10.7 million in reported capital gains in 2010 and 2011, respectively. Next closest would be Reagan, who reported $256,978 in 1982. Put another way, Romney’s capital gains income in 2010 is 49 times higher than the next highest number we observe.

Figure 2. Capital Gains Income

Not surprisingly, Romney’s returns are also the longest. His 2010 returns were 203 pages, and his 2011 returns were 104 pages. The next longest is Obama’s 2009 returns at 65 pages. Though it is an imperfect proxy, the length of the tax returns can presumably tell us something about their complexity.

Figure 3. Length of Tax Returns

Of course, one might object that most of the other returns involve sitting presidents, so it is an unfair to compare Romney’s 2010 and 2011 returns. Romney did not report any wages for either 2010 or 2011. Were he to become president, he would earn $400,000 a year in actual income, and this could change his tax rates.

Still, in the old game of one-of-these-things-is-not-like-the-others, Mitt Romney stands out. His low tax rate and high capital gains put him in a class by himself.

Special thanks to Alex Engler for his help preparing this post.