$9 Million is Missing from Romney’s 2011 Return

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Mitt Romney released his 2011 federal tax returns yesterday in keeping with his promise back in January that he would eventually release them to the public. 

Something is off, though: the man who is running on a platform of business experience and savviness with money has left out $9 million in income from his 2011 return.

Back in January of this year, Romney said that he estimated he would pay around $3.2 million in taxes for 2011 for an effective tax rate of 15.4%. What he didn’t say (and what anyone with an elementary education can figure out) is that 3.2 million is 15.4% of $20.78 million. That seems normal: anyone who saw his 2010 return could see that he paid $3M for an effective tax rate of 13.9%, which makes his total taxable income for 2010 $21.58M. 

From the 2010 return and the 2011 estimate, it’s safe to say that the Romney family brings in around $20-21 million per year. 

But when they released their 2011 returns, the numbers were way off. Specifically, the 2011 return reported $1.94 million in taxes paid for an effective rate of 14.1%, making the 2011 taxable income $13.7 million.

That’s a difference of $9 million from what Romney said was his income just seven months ago.

So let’s lay this out:

  • In 2010, Romney paid taxes on $21.58 million. 
     
  • In January, 2012, Romney estimated that he would pay taxes on $22.7 million. 
     
  • In September, 2012, Romney disclosed that he paid taxes on $13.7 million. 

This is the businessman. This is the CEO of the Republican party. This is the poster boy for fiscal responsibility and conservative budget ideas. How did he overestimate his own taxes by $9 million? 

There are two possible answers, and neither look good for Romney. 

First, the taxable income was deliberately changed in order to appeal to 1) his promise of never paying less than 13%, and 2) the American people who would tear him apart if his tax return showed the amount he should have paid. 

  • His accountants made a good faith payment of $3.2 million in 2010 for his 2011 tax return. This is common for high-rollers who need longer to file their tax returns, because it tells the IRS that the filer has every intent to comply with federal tax code. If his accountants paid $3.2 million in 2010, then surely they would have projected his 2011 earnings to be around what his 2010 earnings were (3.2 is 15.4% of $22.7 million). After all, no savvy CEO of Bain Capital would be living paycheck to paycheck — no, this man knows exactly how much money goes into his account and when. But why would his 2011 income be so drastically different from his 2010 income, unless some deliberate manipulation was going on in order to appeal to the public eye?
  • His 2011 taxes were $1.94 million, and if those taxes were on the income that he said in January was his 2011 income, his actual tax rate was closer to 8.54%. 
  • Romney’s 2011 return wasn’t completed and signed off until September 17th, 2012 — that’s five days ago. That means that he has had this whole time of political backlashing to consider how to tailor the returns in a way to amortize this and depreciate that so his tax rate looks good and reasonable to the American people. I’m not saying that this is wrong, necessarily, but it is conduct unbecoming of an honest political candidate. 

  • UPDATE 9/23: Reader “Josh” pointed out that the $887,000 was a 1/4 payment voucher for estimated 2012 taxes. If you multiply it by 4, you’ll get Romney’s estimated 2012 tax contributions: $3.55 million (for a total income estimated in 2012 of over $20 million — indicating that the only year that was disproportionately off was 2011). 

Second, he is so far removed from his own finances and reality and he can overestimate $9,000,000 and its not a big deal. This is problematic on many fronts.

  • Romney has run his entire campaign on his successes as a businessperson. Would a successful businessperson really overstate $9,000,000 on his own tax returns? 
  • If he did overstate $9 million, what does this say about his attention to detail when it comes to numbers if he’s this nonchalant about overstating 40% of his personal income? Is that the kind of person we want in charge of national budget decisions?
  • If he had originally planned on not releasing his returns and only later buckled under pressure (which is exactly what happened), how did the modified tax returns (again, finished on 9/17) differ so drastically from his estimated taxes? 

Romney could have deliberately changed his 2011 income to appeal to people who think he’s a rich out-of-touch person who is unfit to lead this country because of how much money he makes. He could have cut his income in half to make it look like even rich people like him have tough times and he knows what it feels like to struggle. Or, he could have been so removed from his own finances that this idea of a number-crunching businessman has been a façade this whole time. 

Either way, one this is for sure: there’s a $9 million question that’s going to haunt him until election day. 

  • Ed in Colorado

    That 9 million dollar question isn’t going to haunt him.. or me, It seems to haunt you Obamites who fail at your self-appointed tasks to be income tax inspectors. I’ll worry about Romney, when you vet Obamites Czars and their failure to pay income taxes.. Another point, if you’re so smart in fractals, how come you didn’t keep the “Not A Kenyan” from wrecking our economy..

    • http://www.lawsonry.com/author/augusta Augusta Christensen

      I’m not even going to pretend that one word of this comment makes sense. If there were a $9 million discrepancy in Obama’s taxes, y’all would be starting impeachment proceedings already.

  • Brenda

    Romney is so meticulous to tithe (give 10%) every year to the Mormon church, even brag about it. Why would 2011 be so excessively more unless it was based on greater earnings?

  • Cathy B

    The truth is he and Ann can file amended returns for this year and the last two years if they want to so nothing in the 2009, 2010, 2011 tax returns are yet set in stone. This is the very reason why people of knowledge want him to release at least 5 to 8 years of his tax returns. He has dodged this bullet all through his political life of refusing to release his tax returns. It has to make anyone with any common sense ask, “What is he hiding?” Just as he wants you to vote for him and he will tell you how he will run his Presidency after the election, you will also find out how he runs his financial empire as well. Most of it we know because he does not trust his money to be in America with him as President. That is why it is all in off shore accounts so that when America goes belly up from his policies and it will, his money will still be intact and the rest of us can eat dirt.

  • Michael

    I go with option #1. Don’t forget that the day after the election (when it’s too late for those “pesky” voters to use it against him), he can always file an amended return, showing the “correct” numbers.

  • Martin

    Mitt Romney may also be intending to file an amended return after the election, correcting his income and deduction statements. Win or lose, he needn’t share his return with the public, and his honest effective tax rate will never publicly be known.

  • John

    The 2011 is just a shiny object to distract everyone from the PWC letter. Everyone assumes that his AGI in earlier years bears some similarity to 2010 and 2011, but that just isn’t necessarily the case.

    That letter from PWC is very interesting, and can be construed to mean almost anything.
    Here are the problems I had with it after a five minute read, before I even looked at
    the 2011 return:
    1) In general, whenever someone uses percentages where actual numbers would be more
    appropriate, they are trying to hide something.
    2) “Each year during the period there were federal and state income taxes owed.” Big
    deal. If he paid $1 to the IRS and $1 to some state, this would be a true statement. It is
    meaningless drivel.
    3) “The lowest of any annual “effective federal personal income tax rate” for any year
    during the period is 13.66%. As you requested, we computed each annual “effective annual
    federal personal income tax rate” as total taxes owed divided by adjusted gross income
    as shown on the federal income tax returns as prepared.” A couple things are interesting
    to note here. First, they use “total taxes”, which includes the self employment tax (social
    security and medicare taxes for those people who are employed by someone else), which
    he derided as not really being a tax in his infamous 47% remark. In fact, it is likely to be
    almost completely self employment tax. Consider someone with $10 million of investment
    income, $10 million of business losses (such as you might get from leasing out your
    Gulfstream part time) and $100,000 of speaking fees, resulting in net AGI of $100,000,
    which could easily be completely offset by deductions for charitable contributions and real
    estate taxes. Their “effective tax rate” would be in the range of 13-15% (of the $100,000).
    Without knowing the dollar magnitude and makeup of AGI, this statement is meaningless to anyone who has ever prepared a complex tax return.
    4) The average of the annual “effective federal personal tax rates” as computed based on
    the returns as prepared during the period is 20.20%. This is a derivative of a derivative.
    Anyone remember the Triple A rated mortgage bonds that blew up a couple of years ago.
    They got their rating based on calculations like this. An average of meaningless numbers
    cannot give you a meaningful number any more than combining a pool of ultra low grade
    mortgages can give you a bunch of high quality investments.
    5) The statements about state tax rates are as meaningless as the ones about federal taxes.
    6) What is with the terminology talking about the rates on “the returns as prepared”? Were
    there later audits that modified the statements? Were there aggressive positions taken
    on the returns that had little chance of holding up on audits that never happened? Did he
    have returns prepared that weren’t filed? Or is PWC just saying that they only prepared
    the returns and gave them to Romney, and therefor they can’t make any statements about
    what happened to them after that? Given the rest of the misleading statements in the letter,
    I am disinclined to give him the benefit of the doubt.
    7) The average of the average rate he gave to charity was 13.45%. I’m no expert on the
    Mormon faith, but I do understand that all members are ”required” to give 10% of their
    income to the church. Interestingly, to my knowledge, they don’t define income, but rather
    depend on each member to truthfully come up with the number. I doubt things like tax
    shelters, overseas accounts, deferral strategies, etc. are meant to be taken into account.
    I wonder if Romney tries to pay his church the minimum number he can argue and not a
    penny more, or whether he does a completely separate calculation.
    8) “Total federal income taxes owed, total state taxes reported[why reported and not owed?
    ], and total donations deducted during the period represent 38.49% of your total adjusted
    gross income for the period.” Again, without the details, this is just a pile of meaningless
    numbers combined together. However, I would be willing to bet “$10,000″ that donations are a far higher percentage of this number than anyone thinks.

    The bottom line for me is that it is apparent that this letter is intended to convey a scenario
    that is completely different from what is actually in the missing returns. If this weren’t the
    case, he would have released the returns, a long time ago, or at a minimum this letter
    would have used dollar figures and not percentages.

    The other thing that most people don’t understand is that it is almost impossible to
    really audit a return such as Romney’s. The aggressive positions are almost never on the
    individual return. They are buried several levels deep in partnership and other business
    returns. To do a proper audit, you would need to audit every one of those entities.
    Additionally, even if you do an audit, you are fighting every step of the way with attorneys
    and accountants whose function is to delay you and point you in the wrong direction, give
    half answers or statements such as this letter that are factually true, but meaningless
    (it depends on what the meaning of “is” is). Even if there is an adjustment, to a guy like
    Romney it is just a loan from the government with a slightly higher than normal interest
    rate. This makes it reasonable to take every aggressive position, even if it has only a 5%
    chance of surviving if it went to court, because at a minimum you can use it as a bargaining
    chip in settlement negotiations.

  • http://www.facebook.com/Dave.S831 Dave Suchy

    Lawson had to bring up the born in Kenya bullshit, well Lawson youre a professional. If your publisher said in your bio you were born in Kenya and you werent, why would you let that misinformation stand? Why would you also let it stand when they publicly described you as the first Kenyan born state senator? I dont care what anyone says, he seems to be wishy-washy about where he was born. And Mitt Romney has NOT been employed or in business since he left the office of Governor. Looks like a witchhunt to me. Youre probably one thats been telling people that Romney said he ‘hated” the 47%. I’ll put it to you like this…he paid more taxes than you, whats the problem?

    • http://www.lawsonry.com/author/jesse Jesse Lawson

      I appreciate your passion but I want to forewarn you that I’m intellectually exhausted by the troves of birther rhetoric out there. I’ll try to address your concerns, though:

      The newspaper that described Obama as the first Kenyan-born state senator was a newspaper in Kenya, which, to my knowledge, added that little blurb after production. The Seattle Times published that article and that blurb is omitted. There’s just as much of a likelihood that the editor at the Kenyan paper put that embellishment in there as there is that Obama wanted to capitalize off of the idea of being the first Kenyan-born state senator.

      There are literally tons of conspiracy theories out there about Obama, but according to the American papers that published the story — and the fact that magically that one day just so happens to be the only day in four years that the Kenyan paper was archived on the internet — it’s all a bunch of birther rhetoric. Snopes did a thing on it, too.

      As to the last part of your comments, I don’t appreciate you putting words in my mouth. I’ll address your concerns, though:

      - You said that Romney hasn’t been employed or in business since he left the office. I know this. However, that’s not stopping everyone from using his time at Bain Capital as justification for his ability to fix the economy. Did you watch the RNC at all? Every single video that spoke about his past professional performance had something to do with his business experience.

      - Romney never said he hated anyone. I don’t think Romney hates anyone anymore than I think you hate me. You’re putting words in my mouth and then arguing from those words. It’s not credible and it’s not warranted.

      - You’re implying that I have a problem with the amount of money he paid in taxes. I have problem with his policies and how they affect the middle class, and I don’t appreciate the rhetoric and fanfare that is disillusioning Americans into voting for him. It is my understanding that as a member of the top 1% in America, his economic policies are good for around 1% of the population.

  • http://obeymybrain.com Josh

    Um, that $887,000…that’s his first quartery estimated payment for 2012. It has nothing to do with his 2011 filing. It’s I sent in that same form as a self employed person. Multiply it by 4 and you get what his estimated 2012 taxes will be. It says on the form “Payment Voucher 1″ There are 4 vouchers that you get when you pay quarterly estimated taxes, the third one was just due about a week ago.

    • http://www.lawsonry.com/author/jesse Jesse Lawson

      Josh, good catch. We’ve updated the article to reflect the voucher payment and indicated that it alludes to his estimated 2012 tax obligations. Thanks for the find!

  • Steven

    Honest question about ‘earned income’:
    Of course Romney pulls in money from campaign contributions, I believe a candidate can ‘pay’ himself from PAC donations while he is on the campaign trail. However, I am curious as to how the income of a competing candidate differs from a private businessman. Wouldn’t we expect a dramatic falloff in ‘earned income’ from Romney in 2011? He was preparing to be a candidate for most of last year (in terms of employment) so shouldn’t we presume he would make less in income?

    I am not being deliberately naive, I think. I am genuinely curious. I agree that the two possibilities laid out in this article are the more likely; but isn’t there a third realistic option…he was a candidate for President and NOT a private businessman? I don’t know if that could account for $9M but I think I have a legitimate question.

  • http://gravatar.com/julianrinaldi Julian Rinaldi

    Wow. You have no idea how taxes work. His returns this year were based on his last year’s income. He has no way of knowing how much he will make each year with such a large portfolio, and he needs to overpay based on his 2010 returns or else he gets fined. You just made yourself look extremely ignorant.

    • http://www.lawsonry.com/author/jesse Jesse Lawson

      I appreciate your candid pseudoanalysis, but being an investor myself I’m quite aware of prepayment and IRS extension requests and how they work. I’m also very familiar with how people can amortize and depreciate expenses over the life of an asset or liability in order to “clean up” (read: deliberately misconstrue) their financial statements.

      The point I was alluding to was that there is no way a man running on the platform of business and financial savviness would suddenly lose $9 million in annual income. Even if you consider the inherent risk involved in Goldman Sachs’ equity programs (where a majority of his blind trust income is generated, correct?) a 39.6% income loss for the year is not the track record I’m looking for in a savvy businessperson.

      Please re-read the article. The comments about his income were made in January, well after his prepayment based on the amount of money that can be forecasted from dividend payments. I’m not going to turn the tables and start attacking your knowledge like you have tried with me, but I would ask that you consider how dividend investors like myself can forecast future earnings based on past performance. There’s a reason we retire off of dividends: they’re predictable.

      Just like Mitt Romney.

      • http://www.facebook.com/BakanoKami Matthew Berkhan

        The problem is that you don’t seem to know how estimates work. You’re claiming that the $9million difference between what Romney *estimated* his income would be and what his *actual* income was is tangible cash that had to have gone somewhere.

        I’ll grant the very real possibility that Romney lowered his income by not cashing in on some investment he was planning to, but opted out at the last minute to keep his effective rate from dropping below the 13% threshold he had set. But that still means Romney wouldn’t have gotten that money so it’s not income or taxable.

        I also doubt the amount of research you did before concluding Romney is either a cheat or an idiot. Had you read the tax extension form you link to in your update you’d have seen that the form clear states $3.2 million as the amount of taxes Romney estimated owing in 2011. $887,000 is the amount he paid when sending in the extension request.

        • dd36

          How would he decide in 2012 to not cash in certain investments in 2011?

          It’s not that difficult to estimate income. Presumably he gets monthly or quarterly reports, which he would have gotten in January.

          It does look suspicious. He’d be more respected if he didn’t play these games.

        • http://www.lawsonry.com/author/jesse Jesse Lawson

          You said, “I’ll grant the very real possibility that Romney lowered his income by not cashing in on some investment he was planning to, but opted out at the last minute to keep his effective rate from dropping below the 13% threshold he had set.”

          That’s one of the possibilities I pointed at. And I don’t recall the $887k reflecting on his 2011 returns — it was closer to $1.2 million, wasn’t it?

          I didn’t call Romney a cheat nor did I call him an idiot. Please re-read the article. I said he either deliberately tailored his taxes or he is so far removed from reality that a $9 difference in income could be shrugged off like it’s no big deal (hardly the poster boy for a middle-class America, don’t you think?)

          Regarding the estimated taxes: The amount of money estimated for 2010 that was applied via voucher from 2009 (is indicated on his 2010 tax returns, and it’s a proportional to the amount of income he intended to bring in. The same applies for his 2010 estimate of 2011. I have done this very thing when filing for taxes and know for a fact that no one in their right mind would write a blind estimation to the IRS and then pay a percentage of it unless that percentage was going to be an aggregate amount commensurate with the total tax liability.

  • http://www.facebook.com/ha.dah.75 Dah HA

    AND OBAMA DOESN DISCLOSE CRAP ABOUT HIMSELF, WHY HIS AND HIS WIFES LAW LICENSE3S WERE PULLED, THAST HE BAS BORN IN KENYA AND NOT HAWAII, THAT HE NEVER REALLY GRADUATED FROM EITHER COLLEGES, THAT HE IS PART OF THE NWO / UN AGENDA 21 TO DISMANTLE AMERICA

    • Cpt. Derp

      You are not an intelligent person.

      • http://www.lawsonry.com/author/jesse Jesse Lawson

        What gave that one away?

    • http://www.lawsonry.com/author/jesse Jesse Lawson
      • 12 Years of tax returns for both Obama and Biden (here)
      • Neither of the Obamas’ law licenses were “pulled” — both stopped practicing law voluntarily (here
      • Obama was not born in Kenya (here)
      • Obama did graduate from college (here)

      I’m not sure how to address the rest of your conspiracy theories, but one thing is obvious: it’s highly likely that you did not go after the personal accomplishments of former presidents in this way, and if you did, you might have a disabling propensity to subscribe to warrantless conspiracy theories that are wasting your time.

      Why not talk about issues instead? Why are you so focused on Obama’s past?

      • Johnny

        I THINK HE KNOWS WHAT HE’S TALKING ABOUT. HE’S WRITING IN CAPITALS.

        • http://www.facebook.com/ldmonster Luis R Diaz

          Where can I find this book of conspiracy theories and is there an option for softcover with text in CAPS?

          • http://www.lawsonry.com/author/jesse Jesse Lawson

            Like, the whole book in caps? Or just the cover?

            Maybe they can have an all-caps edition — the Patriot Edition?

        • http://www.facebook.com/johanna.girard.165 Johanna Girard

          JOHNNY, YOU ARE HILARIOUS!

          • Justin Scott

            JOHNNY IS SUCH A GOOD FRIEND.

    • Cathy B

      Perhaps you should go back to school and learn to spell and write before you decide to write a post that makes absolutely no sense what so ever. All you are doing are repeating lies that have already been proved to be lies.

    • Jen

      We know they put their law licenses inactive status to keep from having to meet requirements of a license they are not currently using. He was born in Hawaii. Both Obama & Romney’s fathers were born outside of the country. If you are going to debate, please do it with fact. I am so sick of the lies.