In recent months, we’ve heard a lot of noise about Mitt Romney’s tax returns — and his hesitance in releasing them. But what’s the big deal? Surely there are other issues that need to be discussed outside of presidential candidates’ tax returns, so why is everyone so concerned?Apparently, a presidential candidate’s income, including how and where his or her money is invested, says a lot more than we could ever imagine. In fact, it seems we believe the numbers on a tax return actually predict the likelihood of a candidate becoming a good president.
Presidential Candidates Tax Returns Build Trust
If you’ve been paying attention to the 2012 presidential campaigns, you’ve noticed the discussion about the Mitt Romney tax return. While he has released his 2011 and 2010 returns, he has chosen not to release the rest.
But what does releasing a tax return really mean to the American public? What is really at stake?
The primary reason parties want their opponents’ returns released is for trust-building. If you don’t want to share how much you’ve earned, you’re implying you have something to hide. Maybe you are evading taxes, even have money in offshore accounts.
In this tough economy, many people are sensitive about their tax rates and some argue that the wealthy receive too many tax breaks compared to the average American citizen.
To ease voters’ minds and show they have nothing to hide, many candidates have begun releasing their tax returns, even though they are not required to do so. Ironically, the first person to do so was George Romney, Mitt Romney’s father. He made 12 years of returns available as he prepared his fight against Richard Nixon and Lyndon Johnson in 1968.
Since then, the issue of releasing tax returns has sparked heated debates. Ronald Reagan and George H. W. Bush fought over tax returns until the 1980 Republican convention, and Geraldine Ferraro’s tax returns caused controversy in the 1984 presidential campaign.
What Do Romney’s and Obama’s Tax Returns Show?
Since controversy erupted over Mitt Romney’s tax returns, he willingly released returns from the past two tax years. An Obama tax return for each year of the past decade is also available. So what do they show?
Obama’s 2011 tax return showed he paid an effective federal income tax rate of 20.5 per cent. His return shows that about half of his $789,674 reported income came from his President’s salary, while the other half came from book sales proceeds. In total, the Obamas paid a total of $152,074 in taxes.
An estimate of his 2011 return showed Romney and his wife, Ann, reported earning $21 million while paying $3.2 million in taxes. According to his filed 2010 tax return, he paid a relatively low income tax rate of 13.9 per cent on $21.7 million in earnings.
The reason for this low tax rate is reportedly his significant investment income, which is taxed at 15 per cent. He also had extensive itemized deductions that lowered his tax liability.
So do these figures determine who will be a better president? Better yet, do they show who we are more likely to elect? Nope. No presidential election has been decided by a tax return.
Some even argue that focusing on tax returns diverts attention from the real issues, while others contend that seeing a tax return not only provides insight into the candidate’s personal life, but the types of policies he or she is likely to push as well.
For instance, Reagan strongly opposed government taxes. Could it have been because his 1979 tax return showed he paid nearly 50 per cent of his income in taxes?
If Obama wants to raise taxes for the wealthy, could it be that he wants to punish individuals significantly wealthier than him? Or could Romney’s push to lower taxes for the wealthy (and everyone else) be because he wants to reward his friends?
How voters feel about the connection between candidates and their wealth may make a difference at the polls. According to an analysis conducted by TheStreet.com, the candidates with the most net worth often don’t have the best success in presidential elections.
In fact, four of the five wealthiest candidates in recent years — Ross Perot, Steve Forbes, Al Gore and John Kerry — didn’t make it.
With Mitt Romney’s net worth resting at an estimated $250 million, some wonder if his tax return will hurt more than help his chances of winning. But it won’t be until November, when voters head to the polls, that the real fate of these candidates will be determined.
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