Mitt Romney says he pays 13 percent in taxes. How low is that?
Mitt Romney has tried to fend off criticism about how much he has paid in federal taxes. But his 13 percent tax rate during the past 10 years puts him in peculiar company.
Mitt Romney says he paid an average federal income tax rate of 13 percent during the past 10 years.Skip to next paragraph
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Who else pays the same rate?
One answer would be registered nurses and accident appraisers for insurance companies.
According to the Bureau of Labor Statistics, nurses and appraisers make about $60,000 a year on average, which gives them an individual tax rate of about 15 percent, or actually a little higher than Mr. Romney.
They get to that tax rate because, like most wage earners, they owe payroll taxes – the money that gets deducted from a paycheck and goes to Social Security and Medicare. As a self-employed person, though, Romney's payroll tax "borders on the insignificant,” says Joe Rosenberg, a research associate at the Tax Policy Center, a joint venture of the Washington-based Urban Institute and the Brookings Institution.
In total, Romney paid $29,000 out of $20.7 million in income in 2010 for Medicare and Social Security.
If the nurses and appraisers didn't have to shell out for payroll taxes, their actual average tax rate would be only 4 percent, says Rosenberg.
Another group that pays at about the same rate as Romney is made up of CEOs, dentists, and anesthesiologists. Their earnings of between $163,173 and $210,998, on average, puts them in the 90th to 95th percentile of wage earners, and their effective tax rate is 13.8 percent.
One group that did not pay the same rate as Romney? People who made roughly equal amounts of money – those in the top 0.1 percent of earners. Households making about $20.7 million paid at a 23.6 percent rate, says Scott Klinger, associate fellow of the Institute for Policy Studies in Washington, citing a Tax Policy Center analysis.
Romney pays at a lower tax rate than the top 400 earners did in 2009, Mr. Klinger says. Their income averaged $202 million and they paid taxes at a 19.91 percent rate.
The reason Romney’s overall rate is so low is because the bulk of his income – earned when he ran Bain Capital – is considered “carried interest.” That means it is taxed at the capital-gains rate, which is 15 percent. He also has very large deductions that lower his tax rate further. According to his 2010 return – the only final tax return he has released – he gave $3 million in charitable contributions, including $1.5 million to the Church of Jesus Christ of Latter-day Saints.