It's been two days since presidential candidate Mitt Romney released an avalanche of tax returns. That same night, President Barack Obama emphasized in his State of the Union address that every American needs to pay his or her fair share of taxes.
No one disagrees with the president about that. But it didn't take a political genius to see that Obama's reference was as much a campaign swipe at his likely November general election opponent as it was a tax policy declaration.
Yeah, yeah. Romney made almost $22 million in 2010 but only paid an effective tax rate of around 14 percent.
But some tax experts who've delved into the hundreds of pages of Romney's returns say the former Massachusetts governor could have cut his tax bill even more.
Take, for example, the relatively small amounts of ordinary income Romney received for speaking ($528,871) or serving on a corporate board ($113,881). These earnings were reported on Schedule C filings. Remember, you must file a separate Schedule C for each separate business operation.
That's the same form all of us use when we run our own small business as our main occupation or have a side job to supplement our regular wage-paying job.
Schedule C filers get a lot of opportunities to reduce their gross earnings. In fact, the Internal Revenue Service believes we do too good a job of finding expenses that we can claim on that form to reduce this self-employment income. That's why the agency takes an extra-hard look at folks who file this way.
There are 20 lines on Schedule C where we can write off your sole proprietorship's expenses, as well as a fun catchall section on the form's second page for "other" expenses that didn't fall into the preprinted line categories. Most of us Schedule C filers fill in as many of those lines as we can to reduce our gross self-employment income to a more tax-palatable net amount.
Romney, however, claimed only two expenses -- $9,000 in advertising and $39,756 in commissions and fees -- against his earnings for speaking. On the director's fee Schedule C he didn't claim any expenses.
Really? That's all? I know he has high-powered and very expensive accountants and attorneys filing his complex paperwork, but he didn't have anything else to claim here? I suspect I could have found a few more items.
Side note to the IRS: That last statement is not an invitation to take a closer look at my returns. Thank you.
Tax geeks also have pointed out that Romney could have saved some state tax dollars if he'd invested in Massachusetts municipal bonds.
The point is that Romney's returns, despite their complexity, look to be pretty boring, safe filings. He doesn't appear to be trying to wring every last tax savings out of Uncle Sam via aggressive deduction claims or tax strategies.
Romney even had former IRS Commissioner Fred Goldberg review his returns. Goldberg came to the same conclusion: "There is no indication or suggestion of any tax-motivated or aggressive tax-planning activities. In my judgment, they have fully satisfied their responsibilities as taxpayers."
So Romney did pay his fair share. If his effective tax rate isn't as high as the president or you and I might like, that's the fault of the tax system, not the taxpayer.
And just adding a new tax on millionaires as Obama also suggested in this year's address to the nation isn't necessarily the best way to ensure tax fairness. It's just another layer of tax complexity.
I suspect that if that proposed high-earner tax rate of 30 percent does somehow miraculously make it into law, some tax advisers who are more daring than Romney's will soon find ways to offset that higher rate.
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